Correlation Between United Insurance and BANK OF CHINA

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

Diversification Opportunities for United Insurance and BANK OF CHINA

-0.61

Correlation Coefficient

United Insurance  BANK OF CHINA

Excellent diversification

The 3 months correlation between United and BANK is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and BANK OF CHINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK OF CHINA 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 BANK OF CHINA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK OF CHINA has no effect on the direction of United Insurance i.e., United Insurance and BANK OF CHINA go up and down completely randomly.

Pair Corralation between United Insurance and BANK OF CHINA

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the BANK OF CHINA. But the stock apears to be less risky and, when comparing its historical volatility, United Insurance Holdings is 2.07 times less risky than BANK OF CHINA. The stock trades about -0.04 of its potential returns per unit of risk. The BANK OF CHINA is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  34.00  in BANK OF CHINA on December 20, 2024 and sell it today you would earn a total of  21.00  from holding BANK OF CHINA or generate 61.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

United Insurance Holdings  vs.  BANK OF CHINA

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 nearly stable basic indicators, United Insurance is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

BANK OF CHINA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BANK OF CHINA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BANK OF CHINA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and BANK OF CHINA

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

The idea behind United Insurance Holdings and BANK OF CHINA 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.