Correlation Between United Insurance and SIMS METAL

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

Diversification Opportunities for United Insurance and SIMS METAL

-0.28

Correlation Coefficient

United Insurance  SIMS METAL

Very good diversification

The 3 months correlation between United and SIMS is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and SIMS METAL MGT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMS METAL MGT 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 SIMS METAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMS METAL MGT has no effect on the direction of United Insurance i.e., United Insurance and SIMS METAL go up and down completely randomly.

Pair Corralation between United Insurance and SIMS METAL

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the SIMS METAL. In addition to that, United Insurance is 1.19 times more volatile than SIMS METAL MGT. It trades about -0.04 of its total potential returns per unit of risk. SIMS METAL MGT is currently generating about 0.03 per unit of volatility. If you would invest  780.00  in SIMS METAL MGT on December 8, 2024 and sell it today you would earn a total of  15.00  from holding SIMS METAL MGT or generate 1.92% 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.  SIMS METAL MGT

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SIMS METAL MGT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIMS METAL MGT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, SIMS METAL is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with United Insurance and SIMS METAL

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

The idea behind United Insurance Holdings and SIMS METAL MGT 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.