Correlation Between United Insurance and BE Semiconductor

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

Diversification Opportunities for United Insurance and BE Semiconductor

0.55

Correlation Coefficient

United Insurance  BE Semiconductor

Very weak diversification

The 3 months correlation between United and BSI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and BE Semiconductor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BE Semiconductor Ind 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 BE Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BE Semiconductor Ind has no effect on the direction of United Insurance i.e., United Insurance and BE Semiconductor go up and down completely randomly.

Pair Corralation between United Insurance and BE Semiconductor

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the BE Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, United Insurance Holdings is 1.49 times less risky than BE Semiconductor. The stock trades about -0.2 of its potential returns per unit of risk. The BE Semiconductor Industries is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  13,330  in BE Semiconductor Industries on October 25, 2024 and sell it today you would earn a total of  1,065  from holding BE Semiconductor Industries or generate 7.99% return on investment over 90 days.

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

United Insurance Holdings  vs.  BE Semiconductor Industries

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.

BE Semiconductor Ind

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BE Semiconductor Industries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BE Semiconductor unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and BE Semiconductor

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

The idea behind United Insurance Holdings and BE Semiconductor Industries 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.