Correlation Between United Insurance and BJs Wholesale

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

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

Diversification Opportunities for United Insurance and BJs Wholesale

0.81

Correlation Coefficient

United Insurance  BJs Wholesale

Very poor diversification

The 3 months correlation between United and BJs is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club and United 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 United Insurance Holdings are associated (or correlated) with BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of United Insurance i.e., United Insurance and BJs Wholesale go up and down completely randomly.

Pair Corralation between United Insurance and BJs Wholesale

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the BJs Wholesale. In addition to that, United Insurance is 2.28 times more volatile than BJs Wholesale Club. It trades about -0.16 of its total potential returns per unit of risk. BJs Wholesale Club is currently generating about -0.32 per unit of volatility. If you would invest  9,400  in BJs Wholesale Club on October 12, 2024 and sell it today you would lose (650.00) from holding BJs Wholesale Club or give up 6.91% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  BJs Wholesale Club

United Insurance Holdings

Risk-Adjusted Performance

8 of 100

Good

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

BJs Wholesale Club

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with United Insurance and BJs Wholesale

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

The idea behind United Insurance Holdings and BJs Wholesale Club 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.