Correlation Between United Insurance and Vale SA

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

Diversification Opportunities for United Insurance and Vale SA

-0.08

Correlation Coefficient

United Insurance  Vale SA

Good diversification

The 3 months correlation between United and Vale is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of United Insurance i.e., United Insurance and Vale SA go up and down completely randomly.

Pair Corralation between United Insurance and Vale SA

Assuming the 90 days horizon United Insurance is expected to generate 1.19 times less return on investment than Vale SA. In addition to that, United Insurance is 1.28 times more volatile than Vale SA. It trades about 0.05 of its total potential returns per unit of risk. Vale SA is currently generating about 0.07 per unit of volatility. If you would invest  920.00  in Vale SA on December 2, 2024 and sell it today you would earn a total of  21.00  from holding Vale SA or generate 2.28% return on investment over 90 days.

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

United Insurance Holdings  vs.  Vale SA

United Insurance Holdings

Risk-Adjusted Performance

Very Weak

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

Vale SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Vale SA 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 Vale SA

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

The idea behind United Insurance Holdings and Vale SA 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.