Correlation Between United Insurance and Compagnie Financière

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

Diversification Opportunities for United Insurance and Compagnie Financière

-0.23

Correlation Coefficient

United Insurance  Compagnie Financière

Very good diversification

The 3 months correlation between United and Compagnie is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Compagnie Financire Richemont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie Financière 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 Compagnie Financière. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie Financière has no effect on the direction of United Insurance i.e., United Insurance and Compagnie Financière go up and down completely randomly.

Pair Corralation between United Insurance and Compagnie Financière

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the Compagnie Financière. But the stock apears to be less risky and, when comparing its historical volatility, United Insurance Holdings is 1.64 times less risky than Compagnie Financière. The stock trades about -0.05 of its potential returns per unit of risk. The Compagnie Financire Richemont is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,430  in Compagnie Financire Richemont on December 23, 2024 and sell it today you would earn a total of  220.00  from holding Compagnie Financire Richemont or generate 15.38% 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.  Compagnie Financire Richemont

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.

Compagnie Financière

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie Financire Richemont are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Compagnie Financière reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and Compagnie Financière

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

The idea behind United Insurance Holdings and Compagnie Financire Richemont 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.