Correlation Between ProAssurance and NI Holdings

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Can any of the company-specific risk be diversified away by investing in both ProAssurance and NI Holdings 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 NI Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ProAssurance and NI Holdings, you can compare the effects of market volatilities on ProAssurance and NI Holdings 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 NI Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProAssurance and NI Holdings.

Diversification Opportunities for ProAssurance and NI Holdings

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between ProAssurance and NODK is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ProAssurance and NI Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NI Holdings 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 NI Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NI Holdings has no effect on the direction of ProAssurance i.e., ProAssurance and NI Holdings go up and down completely randomly.

Pair Corralation between ProAssurance and NI Holdings

Considering the 90-day investment horizon ProAssurance is expected to generate 1.79 times more return on investment than NI Holdings. However, ProAssurance is 1.79 times more volatile than NI Holdings. It trades about 0.16 of its potential returns per unit of risk. NI Holdings is currently generating about -0.08 per unit of risk. If you would invest  1,299  in ProAssurance on February 6, 2024 and sell it today you would earn a total of  96.00  from holding ProAssurance or generate 7.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ProAssurance  vs.  NI Holdings

 Performance 
       Timeline  
ProAssurance 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in ProAssurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ProAssurance may actually be approaching a critical reversion point that can send shares even higher in June 2024.
NI Holdings 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NI Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental indicators, NI Holdings may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ProAssurance and NI Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ProAssurance and NI Holdings

The main advantage of trading using opposite ProAssurance and NI Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProAssurance position performs unexpectedly, NI Holdings 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 NI Holdings will offset losses from the drop in NI Holdings' long position.
The idea behind ProAssurance and NI Holdings 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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