Correlation Between Prestige Consumer and United Insurance

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

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

Diversification Opportunities for Prestige Consumer and United Insurance

0.92

Correlation Coefficient

Prestige Consumer  United Insurance

Almost no diversification

The 3 months correlation between Prestige and United is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Consumer Healthcare and United Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance Holdings and Prestige Consumer 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 Prestige Consumer Healthcare 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 Holdings has no effect on the direction of Prestige Consumer i.e., Prestige Consumer and United Insurance go up and down completely randomly.

Pair Corralation between Prestige Consumer and United Insurance

Assuming the 90 days horizon Prestige Consumer Healthcare is expected to under-perform the United Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Prestige Consumer Healthcare is 3.35 times less risky than United Insurance. The stock trades about -0.75 of its potential returns per unit of risk. The United Insurance Holdings is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  1,258  in United Insurance Holdings on October 12, 2024 and sell it today you would lose (108.00) from holding United Insurance Holdings or give up 8.59% of portfolio value over 90 days.

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

Prestige Consumer Healthcare  vs.  United Insurance Holdings

Prestige Consumer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prestige Consumer reported solid returns over the last few months and may actually be approaching a breakup point.

United Insurance Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prestige Consumer and United Insurance

The main advantage of trading using opposite Prestige Consumer and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Consumer 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 Prestige Consumer Healthcare and United Insurance Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.