Correlation Between Hawkins and American Coastal

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

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

Diversification Opportunities for Hawkins and American Coastal

0.4

Correlation Coefficient

Hawkins  American Coastal

Very weak diversification

The 3 months correlation between Hawkins and American is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and American Coastal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Coastal Ins and Hawkins 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 Hawkins are associated (or correlated) with American Coastal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Coastal Ins has no effect on the direction of Hawkins i.e., Hawkins and American Coastal go up and down completely randomly.

Pair Corralation between Hawkins and American Coastal

Given the investment horizon of 90 days Hawkins is expected to under-perform the American Coastal. In addition to that, Hawkins is 1.05 times more volatile than American Coastal Insurance. It trades about -0.09 of its total potential returns per unit of risk. American Coastal Insurance is currently generating about -0.06 per unit of volatility. If you would invest  1,279  in American Coastal Insurance on December 29, 2024 and sell it today you would lose (126.00) from holding American Coastal Insurance or give up 9.85% of portfolio value over 90 days.

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

Hawkins  vs.  American Coastal Insurance

Hawkins

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hawkins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward-looking signals remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

American Coastal Ins

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Coastal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Hawkins and American Coastal

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

The idea behind Hawkins and American Coastal 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.