Correlation Between Artistic Denim and United Insurance

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

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

Diversification Opportunities for Artistic Denim and United Insurance

-0.05

Correlation Coefficient

Artistic Denim  United Insurance

Good diversification

The 3 months correlation between Artistic and United is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Artistic Denim Mills and United Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance and Artistic Denim 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 Artistic Denim Mills 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 has no effect on the direction of Artistic Denim i.e., Artistic Denim and United Insurance go up and down completely randomly.

Pair Corralation between Artistic Denim and United Insurance

Assuming the 90 days trading horizon Artistic Denim Mills is expected to generate 1.85 times more return on investment than United Insurance. However, Artistic Denim is 1.85 times more volatile than United Insurance. It trades about 0.12 of its potential returns per unit of risk. United Insurance is currently generating about 0.11 per unit of risk. If you would invest  4,547  in Artistic Denim Mills on October 6, 2024 and sell it today you would earn a total of  277.00  from holding Artistic Denim Mills or generate 6.09% return on investment over 90 days.

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

Artistic Denim Mills  vs.  United Insurance

Artistic Denim Mills

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Artistic Denim Mills are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Artistic Denim sustained solid returns over the last few months and may actually be approaching a breakup point.

United Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, United Insurance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Artistic Denim and United Insurance

The main advantage of trading using opposite Artistic Denim and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artistic Denim 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 Artistic Denim Mills and United Insurance 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.