Correlation Between Ares Management and United Insurance

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

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

Diversification Opportunities for Ares Management and United Insurance

0.57

Correlation Coefficient

Ares Management  United Insurance

Very weak diversification

The 3 months correlation between Ares and United is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management Corp and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings and Ares Management 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 Ares Management Corp are associated (or correlated) with United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of Ares Management i.e., Ares Management and United Insurance go up and down completely randomly.

Pair Corralation between Ares Management and United Insurance

Assuming the 90 days horizon Ares Management Corp is expected to under-perform the United Insurance. In addition to that, Ares Management is 1.18 times more volatile than United Insurance Holdings. It trades about -0.1 of its total potential returns per unit of risk. United Insurance Holdings is currently generating about -0.1 per unit of volatility. If you would invest  1,219  in United Insurance Holdings on December 28, 2024 and sell it today you would lose (159.00) from holding United Insurance Holdings or give up 13.04% of portfolio value over 90 days.

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

Ares Management Corp  vs.  United Insurance Holdings

Ares Management Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ares Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Insurance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ares Management and United Insurance

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

The idea behind Ares Management Corp and United Insurance 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.