Correlation Between United Insurance and Boston Properties

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

Diversification Opportunities for United Insurance and Boston Properties

-0.41

Correlation Coefficient

United Insurance  Boston Properties

Very good diversification

The 3 months correlation between United and Boston is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties 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 Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of United Insurance i.e., United Insurance and Boston Properties go up and down completely randomly.

Pair Corralation between United Insurance and Boston Properties

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the Boston Properties. In addition to that, United Insurance is 1.11 times more volatile than Boston Properties. It trades about -0.14 of its total potential returns per unit of risk. Boston Properties is currently generating about -0.07 per unit of volatility. If you would invest  7,054  in Boston Properties on October 26, 2024 and sell it today you would lose (180.00) from holding Boston Properties or give up 2.55% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  Boston Properties

United Insurance Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 5 (%) 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.

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties 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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Insurance and Boston Properties

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

The idea behind United Insurance Holdings and Boston Properties 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.