Correlation Between RLI Corp and Markel

Can any of the company-specific risk be diversified away by investing in both RLI Corp and Markel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining RLI Corp and Markel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RLI Corp and Markel, you can compare the effects of market volatilities on RLI Corp and Markel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in RLI Corp with a short position of Markel. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Markel.

Diversification Opportunities for RLI Corp and Markel

0.7

Correlation Coefficient

RLI Corp  Markel

Poor diversification

The 3 months correlation between RLI and Markel is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Markel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel and RLI Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on RLI Corp are associated (or correlated) with Markel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel has no effect on the direction of RLI Corp i.e., RLI Corp and Markel go up and down completely randomly.

Pair Corralation between RLI Corp and Markel

Considering the 90-day investment horizon RLI Corp is expected to under-perform the Markel. In addition to that, RLI Corp is 1.34 times more volatile than Markel. It trades about -0.14 of its total potential returns per unit of risk. Markel is currently generating about -0.18 per unit of volatility. If you would invest  150,878  in Markel on January 31, 2024 and sell it today you would lose (5,944) from holding Markel or give up 3.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

RLI Corp  vs.  Markel

RLI Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RLI Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, RLI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Markel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Markel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Markel is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with RLI Corp and Markel

The main advantage of trading using opposite RLI Corp and Markel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp position performs unexpectedly, Markel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Markel will offset losses from the drop in Markel's long position.

The idea behind RLI Corp and Markel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.