Correlation Between Visa and United Insurance

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

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

Diversification Opportunities for Visa and United Insurance

-0.4

Correlation Coefficient

Visa  United Insurance

Very good diversification

The 3 months correlation between Visa and United is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and United Insurance go up and down completely randomly.

Pair Corralation between Visa and United Insurance

Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.39 times more return on investment than United Insurance. However, Visa Class A is 2.58 times less risky than United Insurance. It trades about 0.25 of its potential returns per unit of risk. United Insurance Holdings is currently generating about 0.0 per unit of risk. If you would invest  31,612  in Visa Class A on December 1, 2024 and sell it today you would earn a total of  4,659  from holding Visa Class A or generate 14.74% return on investment over 90 days.

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

Visa Class A  vs.  United Insurance Holdings

Visa Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa showed solid returns over the last few months and may actually be approaching a breakup point.

United Insurance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Visa and United Insurance

The main advantage of trading using opposite Visa and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A 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.

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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.