Correlation Between Vale SA and United Insurance
Can any of the company-specific risk be diversified away by investing in both Vale SA 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 Vale SA and United Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and United Insurance Holdings, you can compare the effects of market volatilities on Vale SA 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 Vale SA with a short position of United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and United Insurance.
Diversification Opportunities for Vale SA and United Insurance
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and United is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA 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 Vale SA 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 Vale SA 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 Vale SA i.e., Vale SA and United Insurance go up and down completely randomly.
Pair Corralation between Vale SA and United Insurance
Assuming the 90 days trading horizon Vale SA is expected to under-perform the United Insurance. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 2.22 times less risky than United Insurance. The stock trades about -0.17 of its potential returns per unit of risk. The United Insurance Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,110 in United Insurance Holdings on September 4, 2024 and sell it today you would earn a total of 170.00 from holding United Insurance Holdings or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Vale SA vs. United Insurance Holdings
Performance |
| Timeline |
| Vale SA |
| United Insurance Holdings |
Vale SA and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and United Insurance
The main advantage of trading using opposite Vale SA and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA 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.| Vale SA vs. United Insurance Holdings | Vale SA vs. OFFICE DEPOT | Vale SA vs. CENTURIA OFFICE REIT | Vale SA vs. Safety Insurance Group |
| United Insurance vs. The Progressive | United Insurance vs. The Allstate | United Insurance vs. PICC Property and | United Insurance vs. Fairfax Financial Holdings |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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