Correlation Between United Insurance and ARROW ELECTRONICS

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

Diversification Opportunities for United Insurance and ARROW ELECTRONICS

0.67

Correlation Coefficient

United Insurance  ARROW ELECTRONICS

Poor diversification

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

Pair Corralation between United Insurance and ARROW ELECTRONICS

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the ARROW ELECTRONICS. In addition to that, United Insurance is 1.45 times more volatile than ARROW ELECTRONICS. It trades about -0.09 of its total potential returns per unit of risk. ARROW ELECTRONICS is currently generating about -0.09 per unit of volatility. If you would invest  10,800  in ARROW ELECTRONICS on December 29, 2024 and sell it today you would lose (900.00) from holding ARROW ELECTRONICS or give up 8.33% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  ARROW ELECTRONICS

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 latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ARROW ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARROW ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with United Insurance and ARROW ELECTRONICS

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

The idea behind United Insurance Holdings and ARROW ELECTRONICS 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.