Correlation Between United Insurance and Canadian Utilities

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

Diversification Opportunities for United Insurance and Canadian Utilities

0.35

Correlation Coefficient

United Insurance  Canadian Utilities

Weak diversification

The 3 months correlation between United and Canadian is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of United Insurance i.e., United Insurance and Canadian Utilities go up and down completely randomly.

Pair Corralation between United Insurance and Canadian Utilities

Assuming the 90 days horizon United Insurance Holdings is expected to generate 2.42 times more return on investment than Canadian Utilities. However, United Insurance is 2.42 times more volatile than Canadian Utilities Limited. It trades about -0.05 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.16 per unit of risk. If you would invest  1,267  in United Insurance Holdings on October 8, 2024 and sell it today you would lose (37.00) from holding United Insurance Holdings or give up 2.92% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  Canadian Utilities Limited

United Insurance Holdings

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, United Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Canadian Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Canadian Utilities 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 Canadian Utilities

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

The idea behind United Insurance Holdings and Canadian Utilities Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.