Correlation Between Crescent Star and United Insurance

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

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

Diversification Opportunities for Crescent Star and United Insurance

-0.51

Correlation Coefficient

Crescent Star  United Insurance

Excellent diversification

The 3 months correlation between Crescent and United is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and United Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance and Crescent Star 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 Crescent Star Insurance 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 Crescent Star i.e., Crescent Star and United Insurance go up and down completely randomly.

Pair Corralation between Crescent Star and United Insurance

Assuming the 90 days trading horizon Crescent Star Insurance is expected to under-perform the United Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Crescent Star Insurance is 1.26 times less risky than United Insurance. The stock trades about -0.14 of its potential returns per unit of risk. The United Insurance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,601  in United Insurance on December 5, 2024 and sell it today you would earn a total of  125.00  from holding United Insurance or generate 7.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Crescent Star Insurance  vs.  United Insurance

Crescent Star Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crescent Star Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

United Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, United Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Crescent Star and United Insurance

The main advantage of trading using opposite Crescent Star and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Star 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 Crescent Star Insurance 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.