Correlation Between United Insurance and Snam SpA

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

Diversification Opportunities for United Insurance and Snam SpA

-0.67

Correlation Coefficient

United Insurance  Snam SpA

Excellent diversification

The 3 months correlation between United and Snam is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA 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 Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of United Insurance i.e., United Insurance and Snam SpA go up and down completely randomly.

Pair Corralation between United Insurance and Snam SpA

Assuming the 90 days horizon United Insurance Holdings is expected to generate 5.17 times more return on investment than Snam SpA. However, United Insurance is 5.17 times more volatile than Snam SpA. It trades about 0.09 of its potential returns per unit of risk. Snam SpA is currently generating about 0.01 per unit of risk. If you would invest  156.00  in United Insurance Holdings on October 10, 2024 and sell it today you would earn a total of  1,074  from holding United Insurance Holdings or generate 688.46% 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.  Snam SpA

United Insurance Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 14 (%) 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.

Snam SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snam SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Snam SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with United Insurance and Snam SpA

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

The idea behind United Insurance Holdings and Snam SpA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.