Correlation Between Kingstone Companies and HCI

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

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

Diversification Opportunities for Kingstone Companies and HCI

-0.06

Correlation Coefficient

Kingstone Companies  HCI

Good diversification

The 3 months correlation between Kingstone and HCI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Kingstone Companies and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group and Kingstone Companies 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 Kingstone Companies are associated (or correlated) with HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Kingstone Companies i.e., Kingstone Companies and HCI go up and down completely randomly.

Pair Corralation between Kingstone Companies and HCI

Given the investment horizon of 90 days Kingstone Companies is expected to generate 1.48 times less return on investment than HCI. In addition to that, Kingstone Companies is 2.25 times more volatile than HCI Group. It trades about 0.07 of its total potential returns per unit of risk. HCI Group is currently generating about 0.22 per unit of volatility. If you would invest  11,475  in HCI Group on December 28, 2024 and sell it today you would earn a total of  3,338  from holding HCI Group or generate 29.09% return on investment over 90 days.

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

Kingstone Companies  vs.  HCI Group

Kingstone Companies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingstone Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

HCI Group

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HCI Group are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, HCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingstone Companies and HCI

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

The idea behind Kingstone Companies and HCI Group 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.