Correlation Between White Mountains and Kinsale Capital

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

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

Diversification Opportunities for White Mountains and Kinsale Capital

0.67

Correlation Coefficient

White Mountains  Kinsale Capital

Poor diversification

The 3 months correlation between White and Kinsale is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding White Mountains Insurance and Kinsale Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinsale Capital Group and White Mountains 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 White Mountains Insurance are associated (or correlated) with Kinsale Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinsale Capital Group has no effect on the direction of White Mountains i.e., White Mountains and Kinsale Capital go up and down completely randomly.

Pair Corralation between White Mountains and Kinsale Capital

Considering the 90-day investment horizon White Mountains Insurance is expected to generate 0.37 times more return on investment than Kinsale Capital. However, White Mountains Insurance is 2.72 times less risky than Kinsale Capital. It trades about 0.12 of its potential returns per unit of risk. Kinsale Capital Group is currently generating about -0.21 per unit of risk. If you would invest  175,400  in White Mountains Insurance on February 2, 2024 and sell it today you would earn a total of  6,974  from holding White Mountains Insurance or generate 3.98% return on investment over 90 days.

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

White Mountains Insurance  vs.  Kinsale Capital Group

White Mountains Insurance

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in White Mountains Insurance are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, White Mountains displayed solid returns over the last few months and may actually be approaching a breakup point.

Kinsale Capital Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinsale Capital Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kinsale Capital 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 White Mountains and Kinsale Capital

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

The idea behind White Mountains Insurance and Kinsale Capital Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..