Correlation Between United Insurance and GOODYEAR T

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

Diversification Opportunities for United Insurance and GOODYEAR T

0.85

Correlation Coefficient

United Insurance  GOODYEAR T

Very poor diversification

The 3 months correlation between United and GOODYEAR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of United Insurance i.e., United Insurance and GOODYEAR T go up and down completely randomly.

Pair Corralation between United Insurance and GOODYEAR T

Assuming the 90 days horizon United Insurance Holdings is expected to generate 0.92 times more return on investment than GOODYEAR T. However, United Insurance Holdings is 1.09 times less risky than GOODYEAR T. It trades about -0.01 of its potential returns per unit of risk. GOODYEAR T RUBBER is currently generating about -0.16 per unit of risk. If you would invest  1,260  in United Insurance Holdings on September 23, 2024 and sell it today you would lose (20.00) from holding United Insurance Holdings or give up 1.59% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  GOODYEAR T RUBBER

United Insurance Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 7 (%) 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.

GOODYEAR T RUBBER

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and GOODYEAR T

The main advantage of trading using opposite United Insurance and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Insurance position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.

The idea behind United Insurance Holdings and GOODYEAR T RUBBER 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.