On Tuesday afternoon, the CBOE Volatility Index surged more than 38% to hit 14. Driving the ascent of the VIX was a trifecta of factors. While tensions over North Korea continued to escalate, markets were visited by familiar concerns over a policy paralysis in Washington. Meanwhile, news that a new category 5 hurricane, Irma, has hit the Caribbean caused severe alarm, even as Texas struggles to recover from the effects of Hurricane Harvey.

Against this backdrop, the spike in the market’s fear gauge is perfectly understandable. Since these events could drastically dent investor confidence, picking value stocks with low beta looks like a smart option at this point. Beta measures the tendency of a stock's returns to respond to market swings. Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.

North Korean Tensions Continue to Rise

In his latest comments on North Korea’s nuclear tests, Russian President Vladimir Putin described the crisis which might be “impossible” to resolve. These comments are in line with the sentiments of several market watchers who believe that the United States has yet to come up with a concrete response to North Korea’s actions. Given the limited success of strict sanctions in the past, the United States’ options seem severely limited.

Meanwhile, North Korea’s chief diplomat to the United Nations Han Tae Song said the United States could soon receive more “gift packages." His comments come at a time when South Korea has expressed the view that its northern neighbor is likely to conduct an ICBM test around Sep 9. Clearly, rhetoric and speculation are likely to remain in abundance on the North Korean front.

Hurricane Irma Prepares to Strike

Meanwhile, the specter of Hurricane Irma looms large even as Texas is still recovering from the effects of Hurricane Harvey. Irma is still making its way through the Caribbean islands and has been characterized as a category 5 hurricane, one of the strongest Atlantic cyclones on record.

Experts believe that Irma will ultimately head toward Florida. The state’s governor Rick Scott declared a state of emergency on Sep 4 and has asked authorities to prepare for the worst possible outcome. Forecasters are yet to fix where the storm will make landfall in the United States with predictions ranging from Alabama to the Carolinas.

Policy Paralysis, Panic Lead to Rotation

The Financial Select Sector SPDR Fund (XLF) lost 2.10% on Sep 5, suffering its worst decline since May. Such a decline was the result of investors moving out of stocks that would have benefited from tax deregulations to safer havens such as bonds. Market watchers are increasingly losing faith in Trump Administration’s ability to push through the much-awaited tax reforms. The rotation from financial shares into bonds led to the yield on 10-year Treasury notes falling to 2.07%, its lowest level since Nov 9, 2016.

Shares of financial companies nosedived on Tuesday. Also weighing on treasury bonds were comments from Federal Reserve Governor Lael Brainard. According to Brainard, the Fed should slow down the momentum of interest rate hikes in the face of relatively lower inflation rates which have not hit the target of 2% over the past five years.

Our Choices

Despite the positive tone that markets have retained over an extended period, this trio of factors could snap the chain of gains. In such an event, it would be best to add some safe bets to your portfolio in order to shore up gains.

In such a situation, it makes good sense to pick value stocks with low beta, which could protect gains made recently. Our selection is also backed by a good Zacks Value Score and Zacks Rank.

We narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best opportunities in the value investing space.

CBIZ, Inc. (CBZ - Free Report) provides professional business services that help clients better manage their finances and employees.

CBIZ holds a Zacks Rank #1 and has a Value Style Score of A. The stock has a beta value of 0.91. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 17.30, lower than the industry average of 20.09.

Atlas Financial Holdings, Inc. (AFH - Free Report) provides commercial automobile insurance policies primarily in the United States through its subsidiaries.

Atlas Financial holds a Value Style Score of B. The stock has a beta value of 0.87 and a P/E (F1) of 10.31x, compared to the industry average of 14.72. The stock has a Zacks Rank #1. 

Magellan Health, Inc. (MGLN - Free Report) is the United States’ leading behavioral managed care organization.

Magellan Health holds a Zacks Rank #2 (Buy) has a Value Style Score of A. The stock has a beta value of 0.57 and a P/E (F1) of 17.06x, lower than the industry average of 17.49. It has a PEG ratio of 0.95, lower than the industry average of 1.52.

Koppers Holdings Inc. (KOP - Free Report) is a global integrated producer of carbon compounds and treated wood products.

Koppers Holdings holds a Zacks Rank #2 and has a Value Style Score of A. The stock has a beta value of 0.97 and a P/E (F1) of 12.21x, lower than the industry average of 15.49. It has a PEG ratio of 0.68, lower than the industry average of 1.99.

Orbotech Ltd. (ORBK - Free Report) is the world leader in the design, development, manufacture and marketing of AOI systems for use in the manufacture of printed circuit boards and flat panel displays.

Orbotech holds a Zacks Rank #2 and has a Value Style Score of B. The stock has a beta value of 0.78 and a P/E (F1) of 15.22x, lower than the industry average of 16.58.