Correlation Between United Insurance and PRECISION DRILLING

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

Diversification Opportunities for United Insurance and PRECISION DRILLING

0.42

Correlation Coefficient

United Insurance  PRECISION DRILLING

Very weak diversification

The 3 months correlation between United and PRECISION is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and PRECISION DRILLING P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PRECISION DRILLING 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 PRECISION DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PRECISION DRILLING has no effect on the direction of United Insurance i.e., United Insurance and PRECISION DRILLING go up and down completely randomly.

Pair Corralation between United Insurance and PRECISION DRILLING

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the PRECISION DRILLING. In addition to that, United Insurance is 1.18 times more volatile than PRECISION DRILLING P. It trades about -0.05 of its total potential returns per unit of risk. PRECISION DRILLING P is currently generating about 0.26 per unit of volatility. If you would invest  5,550  in PRECISION DRILLING P on October 8, 2024 and sell it today you would earn a total of  550.00  from holding PRECISION DRILLING P or generate 9.91% return on investment over 90 days.

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

United Insurance Holdings  vs.  PRECISION DRILLING P

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.

PRECISION DRILLING

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PRECISION DRILLING P are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, PRECISION DRILLING may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with United Insurance and PRECISION DRILLING

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

The idea behind United Insurance Holdings and PRECISION DRILLING P 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.