Correlation Between United Insurance and Microchip Technology

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

Diversification Opportunities for United Insurance and Microchip Technology

-0.79

Correlation Coefficient

United Insurance  Microchip Technology

Pay attention - limited upside

The 3 months correlation between United and Microchip is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Microchip Technology Incorpora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microchip Technology 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 Microchip Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microchip Technology has no effect on the direction of United Insurance i.e., United Insurance and Microchip Technology go up and down completely randomly.

Pair Corralation between United Insurance and Microchip Technology

Assuming the 90 days horizon United Insurance Holdings is expected to generate 1.68 times more return on investment than Microchip Technology. However, United Insurance is 1.68 times more volatile than Microchip Technology Incorporated. It trades about 0.1 of its potential returns per unit of risk. Microchip Technology Incorporated is currently generating about -0.15 per unit of risk. If you would invest  1,020  in United Insurance Holdings on September 27, 2024 and sell it today you would earn a total of  230.00  from holding United Insurance Holdings or generate 22.55% return on investment over 90 days.

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

United Insurance Holdings  vs.  Microchip Technology Incorpora

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.

Microchip Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microchip Technology Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Insurance and Microchip Technology

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

The idea behind United Insurance Holdings and Microchip Technology Incorporated 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 CEOs Directory module to screen CEOs from public companies around the world.