Correlation Between United Insurance and Wah Nobel

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

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

Diversification Opportunities for United Insurance and Wah Nobel

0.54

Correlation Coefficient

United Insurance  Wah Nobel

Very weak diversification

The 3 months correlation between United and Wah is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals and United Insurance 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 United Insurance are associated (or correlated) with Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of United Insurance i.e., United Insurance and Wah Nobel go up and down completely randomly.

Pair Corralation between United Insurance and Wah Nobel

Assuming the 90 days trading horizon United Insurance is expected to generate 2.33 times less return on investment than Wah Nobel. But when comparing it to its historical volatility, United Insurance is 1.6 times less risky than Wah Nobel. It trades about 0.18 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  21,899  in Wah Nobel Chemicals on September 17, 2024 and sell it today you would earn a total of  2,001  from holding Wah Nobel Chemicals or generate 9.14% return on investment over 90 days.

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

United Insurance  vs.  Wah Nobel Chemicals

United Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance are ranked lower than 7 (%) 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 January 2025.

Wah Nobel Chemicals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wah Nobel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and Wah Nobel

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

The idea behind United Insurance and Wah Nobel Chemicals 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.