Correlation Between Selective Insurance and PulteGroup

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

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

Diversification Opportunities for Selective Insurance and PulteGroup

-0.17

Correlation Coefficient

Selective Insurance  PulteGroup

Good diversification

The 3 months correlation between Selective and PulteGroup is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and PulteGroup in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PulteGroup and Selective Insurance 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 Selective Insurance Group are associated (or correlated) with PulteGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PulteGroup has no effect on the direction of Selective Insurance i.e., Selective Insurance and PulteGroup go up and down completely randomly.

Pair Corralation between Selective Insurance and PulteGroup

Assuming the 90 days horizon Selective Insurance Group is expected to under-perform the PulteGroup. But the stock apears to be less risky and, when comparing its historical volatility, Selective Insurance Group is 1.61 times less risky than PulteGroup. The stock trades about -0.04 of its potential returns per unit of risk. The PulteGroup is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,832  in PulteGroup on April 24, 2025 and sell it today you would earn a total of  1,294  from holding PulteGroup or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Selective Insurance Group  vs.  PulteGroup

Selective Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Selective Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PulteGroup

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PulteGroup are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PulteGroup reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Selective Insurance and PulteGroup

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

The idea behind Selective Insurance Group and PulteGroup 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 CEOs Directory module to screen CEOs from public companies around the world.