Correlation Between Union Insurance and China Times
Can any of the company-specific risk be diversified away by investing in both Union Insurance and China Times 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 Union Insurance and China Times into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Insurance Co and China Times Publishing, you can compare the effects of market volatilities on Union Insurance and China Times 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 Union Insurance with a short position of China Times. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Insurance and China Times.
Diversification Opportunities for Union Insurance and China Times
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Union and China is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Union Insurance Co and China Times Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Times Publishing and Union 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 Union Insurance Co are associated (or correlated) with China Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Times Publishing has no effect on the direction of Union Insurance i.e., Union Insurance and China Times go up and down completely randomly.
Pair Corralation between Union Insurance and China Times
Assuming the 90 days trading horizon Union Insurance Co is expected to generate 0.32 times more return on investment than China Times. However, Union Insurance Co is 3.16 times less risky than China Times. It trades about 0.17 of its potential returns per unit of risk. China Times Publishing is currently generating about -0.01 per unit of risk. If you would invest 3,160 in Union Insurance Co on November 7, 2024 and sell it today you would earn a total of 65.00 from holding Union Insurance Co or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Insurance Co vs. China Times Publishing
Performance |
| Timeline |
| Union Insurance |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
| China Times Publishing |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Union Insurance and China Times Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Insurance and China Times
The main advantage of trading using opposite Union Insurance and China Times positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Insurance position performs unexpectedly, China Times 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 China Times will offset losses from the drop in China Times' long position.The idea behind Union Insurance Co and China Times Publishing 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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