Correlation Between PURETECH HEALTH and United Insurance

Can any of the company-specific risk be diversified away by investing in both PURETECH HEALTH and United Insurance 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 PURETECH HEALTH and United Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PURETECH HEALTH PLC and United Insurance Holdings, you can compare the effects of market volatilities on PURETECH HEALTH and United Insurance 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 PURETECH HEALTH with a short position of United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of PURETECH HEALTH and United Insurance.

Diversification Opportunities for PURETECH HEALTH and United Insurance

0.71

Correlation Coefficient

PURETECH HEALTH  United Insurance

Poor diversification

The 3 months correlation between PURETECH and United is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding PURETECH HEALTH PLC and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings and PURETECH HEALTH 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 PURETECH HEALTH PLC are associated (or correlated) with United Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Insurance Holdings has no effect on the direction of PURETECH HEALTH i.e., PURETECH HEALTH and United Insurance go up and down completely randomly.

Pair Corralation between PURETECH HEALTH and United Insurance

Assuming the 90 days horizon PURETECH HEALTH PLC is expected to under-perform the United Insurance. But the stock apears to be less risky and, when comparing its historical volatility, PURETECH HEALTH PLC is 1.1 times less risky than United Insurance. The stock trades about -0.01 of its potential returns per unit of risk. The United Insurance Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  850.00  in United Insurance Holdings on October 9, 2024 and sell it today you would earn a total of  380.00  from holding United Insurance Holdings or generate 44.71% return on investment over 90 days.

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

PURETECH HEALTH PLC  vs.  United Insurance Holdings

PURETECH HEALTH PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with PURETECH HEALTH and United Insurance

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

The idea behind PURETECH HEALTH PLC and United Insurance Holdings 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.