Correlation Between Hiscox and Chemring Group

Can any of the company-specific risk be diversified away by investing in both Hiscox and Chemring Group 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 Hiscox and Chemring Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hiscox and Chemring Group PLC, you can compare the effects of market volatilities on Hiscox and Chemring Group 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 Hiscox with a short position of Chemring Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hiscox and Chemring Group.

Diversification Opportunities for Hiscox and Chemring Group

0.75

Correlation Coefficient

Hiscox  Chemring Group

Poor diversification

The 3 months correlation between Hiscox and Chemring is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hiscox and Chemring Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemring Group PLC and Hiscox 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 Hiscox are associated (or correlated) with Chemring Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemring Group PLC has no effect on the direction of Hiscox i.e., Hiscox and Chemring Group go up and down completely randomly.

Pair Corralation between Hiscox and Chemring Group

Assuming the 90 days trading horizon Hiscox is expected to generate 3.23 times less return on investment than Chemring Group. But when comparing it to its historical volatility, Hiscox is 1.43 times less risky than Chemring Group. It trades about 0.14 of its potential returns per unit of risk. Chemring Group PLC is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  38,150  in Chemring Group PLC on April 20, 2025 and sell it today you would earn a total of  17,150  from holding Chemring Group PLC or generate 44.95% return on investment over 90 days.

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

Hiscox  vs.  Chemring Group PLC

Hiscox

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hiscox are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Hiscox may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Chemring Group PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chemring Group PLC are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Chemring Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hiscox and Chemring Group

The main advantage of trading using opposite Hiscox and Chemring Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hiscox position performs unexpectedly, Chemring Group 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 Chemring Group will offset losses from the drop in Chemring Group's long position.

The idea behind Hiscox and Chemring Group PLC 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.