Correlation Between Central Reinsurance and Union Insurance
Can any of the company-specific risk be diversified away by investing in both Central Reinsurance and Union 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 Central Reinsurance and Union Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Reinsurance Corp and Union Insurance Co, you can compare the effects of market volatilities on Central Reinsurance and Union 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 Central Reinsurance with a short position of Union Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Reinsurance and Union Insurance.
Diversification Opportunities for Central Reinsurance and Union Insurance
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Union is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Central Reinsurance Corp and Union Insurance Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Insurance and Central Reinsurance 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 Central Reinsurance Corp are associated (or correlated) with Union Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Insurance has no effect on the direction of Central Reinsurance i.e., Central Reinsurance and Union Insurance go up and down completely randomly.
Pair Corralation between Central Reinsurance and Union Insurance
Assuming the 90 days trading horizon Central Reinsurance is expected to generate 2.29 times less return on investment than Union Insurance. But when comparing it to its historical volatility, Central Reinsurance Corp is 1.77 times less risky than Union Insurance. It trades about 0.06 of its potential returns per unit of risk. Union Insurance Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,595 in Union Insurance Co on September 5, 2024 and sell it today you would earn a total of 1,620 from holding Union Insurance Co or generate 101.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Central Reinsurance Corp vs. Union Insurance Co
Performance |
| Timeline |
| Central Reinsurance Corp |
| Union Insurance |
Central Reinsurance and Union Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Reinsurance and Union Insurance
The main advantage of trading using opposite Central Reinsurance and Union Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Reinsurance position performs unexpectedly, Union 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 Union Insurance will offset losses from the drop in Union Insurance's long position.| Central Reinsurance vs. Far EasTone Telecommunications | Central Reinsurance vs. Great China Metal | Central Reinsurance vs. Chernan Metal Industrial | Central Reinsurance vs. Camellia Metal Co |
| Union Insurance vs. Shinkong Insurance Co | Union Insurance vs. Central Reinsurance Corp | Union Insurance vs. Taiwan Fire Marine | Union Insurance vs. Taichung Commercial Bank |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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