Correlation Between United Insurance and Colgate Palmolive

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

Diversification Opportunities for United Insurance and Colgate Palmolive

0.56

Correlation Coefficient

United Insurance  Colgate Palmolive

Very weak diversification

The 3 months correlation between United and Colgate is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Colgate Palmolive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colgate Palmolive 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 Colgate Palmolive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colgate Palmolive has no effect on the direction of United Insurance i.e., United Insurance and Colgate Palmolive go up and down completely randomly.

Pair Corralation between United Insurance and Colgate Palmolive

If you would invest  213.00  in United Insurance Holdings on October 26, 2024 and sell it today you would earn a total of  937.00  from holding United Insurance Holdings or generate 439.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	0.2%
Values	Daily Returns

United Insurance Holdings  vs.  Colgate Palmolive

United Insurance Holdings

Risk-Adjusted Performance

5 of 100

Modest

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.

Colgate Palmolive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colgate Palmolive has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Colgate Palmolive is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Insurance and Colgate Palmolive

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

The idea behind United Insurance Holdings and Colgate Palmolive 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.