Correlation Between United Insurance and ARISTOCRAT LEISURE

Can any of the company-specific risk be diversified away by investing in both United Insurance and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE, you can compare the effects of market volatilities on United Insurance and ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and ARISTOCRAT LEISURE.

Diversification Opportunities for United Insurance and ARISTOCRAT LEISURE

0.84

Correlation Coefficient

United Insurance  ARISTOCRAT LEISURE

Very poor diversification

The 3 months correlation between United and ARISTOCRAT is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and ARISTOCRAT LEISURE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARISTOCRAT LEISURE 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 ARISTOCRAT LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARISTOCRAT LEISURE has no effect on the direction of United Insurance i.e., United Insurance and ARISTOCRAT LEISURE go up and down completely randomly.

Pair Corralation between United Insurance and ARISTOCRAT LEISURE

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the ARISTOCRAT LEISURE. In addition to that, United Insurance is 2.28 times more volatile than ARISTOCRAT LEISURE. It trades about -0.2 of its total potential returns per unit of risk. ARISTOCRAT LEISURE is currently generating about 0.07 per unit of volatility. If you would invest  4,160  in ARISTOCRAT LEISURE on October 25, 2024 and sell it today you would earn a total of  40.00  from holding ARISTOCRAT LEISURE or generate 0.96% return on investment over 90 days.

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

United Insurance Holdings  vs.  ARISTOCRAT LEISURE

United Insurance Holdings

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ARISTOCRAT LEISURE

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARISTOCRAT LEISURE are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ARISTOCRAT LEISURE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and ARISTOCRAT LEISURE

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

The idea behind United Insurance Holdings and ARISTOCRAT LEISURE 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.