Correlation Between Union Insurance and New Advanced

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

By analyzing existing cross correlation between Union Insurance Co and New Advanced Electronics, you can compare the effects of market volatilities on Union Insurance and New Advanced 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 Union Insurance with a short position of New Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Insurance and New Advanced.

Diversification Opportunities for Union Insurance and New Advanced

0.59

Correlation Coefficient

Union Insurance  New Advanced

Very weak diversification

The 3 months correlation between Union and New is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Union Insurance Co and New Advanced Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Advanced Electronics and Union 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 Union Insurance Co are associated (or correlated) with New Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Advanced Electronics has no effect on the direction of Union Insurance i.e., Union Insurance and New Advanced go up and down completely randomly.

Pair Corralation between Union Insurance and New Advanced

Assuming the 90 days trading horizon Union Insurance is expected to generate 4.24 times less return on investment than New Advanced. But when comparing it to its historical volatility, Union Insurance Co is 1.54 times less risky than New Advanced. It trades about 0.18 of its potential returns per unit of risk. New Advanced Electronics is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  5,250  in New Advanced Electronics on October 23, 2024 and sell it today you would earn a total of  670.00  from holding New Advanced Electronics or generate 12.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Union Insurance Co  vs.  New Advanced Electronics

Union Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Insurance Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Union Insurance is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

New Advanced Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Advanced Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, New Advanced is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Union Insurance and New Advanced

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

The idea behind Union Insurance Co and New Advanced Electronics 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.