Correlation Between United Insurance and CAIRN HOMES

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

Diversification Opportunities for United Insurance and CAIRN HOMES

0.65

Correlation Coefficient

United Insurance  CAIRN HOMES

Poor diversification

The 3 months correlation between United and CAIRN is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and CAIRN HOMES EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAIRN HOMES EO 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 CAIRN HOMES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAIRN HOMES EO has no effect on the direction of United Insurance i.e., United Insurance and CAIRN HOMES go up and down completely randomly.

Pair Corralation between United Insurance and CAIRN HOMES

Assuming the 90 days horizon United Insurance is expected to generate 1.3 times less return on investment than CAIRN HOMES. In addition to that, United Insurance is 1.56 times more volatile than CAIRN HOMES EO. It trades about 0.06 of its total potential returns per unit of risk. CAIRN HOMES EO is currently generating about 0.12 per unit of volatility. If you would invest  126.00  in CAIRN HOMES EO on October 9, 2024 and sell it today you would earn a total of  110.00  from holding CAIRN HOMES EO or generate 87.3% return on investment over 90 days.

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

United Insurance Holdings  vs.  CAIRN HOMES EO

United Insurance Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 14 (%) 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.

CAIRN HOMES EO

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CAIRN HOMES EO are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CAIRN HOMES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and CAIRN HOMES

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

The idea behind United Insurance Holdings and CAIRN HOMES EO 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.