Correlation Between ProAssurance and Chubb

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

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

Diversification Opportunities for ProAssurance and Chubb

-0.71

Correlation Coefficient

ProAssurance  Chubb

Pay attention - limited upside

The 3 months correlation between ProAssurance and Chubb is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding ProAssurance and Chubb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chubb and ProAssurance 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 ProAssurance are associated (or correlated) with Chubb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chubb has no effect on the direction of ProAssurance i.e., ProAssurance and Chubb go up and down completely randomly.

Pair Corralation between ProAssurance and Chubb

Considering the 90-day investment horizon ProAssurance is expected to generate 2.36 times more return on investment than Chubb. However, ProAssurance is 2.36 times more volatile than Chubb. It trades about 0.06 of its potential returns per unit of risk. Chubb is currently generating about -0.24 per unit of risk. If you would invest  1,286  in ProAssurance on January 28, 2024 and sell it today you would earn a total of  31.00  from holding ProAssurance or generate 2.41% return on investment over 90 days.

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

ProAssurance  vs.  Chubb

ProAssurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProAssurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ProAssurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chubb

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chubb are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Chubb is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ProAssurance and Chubb

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

The idea behind ProAssurance and Chubb 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 Stocks Directory module to find actively traded stocks across global markets.