Correlation Between Star Diamond and United Insurance

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Can any of the company-specific risk be diversified away by investing in both Star Diamond 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 Star Diamond and United Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Star Diamond and United Insurance Holdings, you can compare the effects of market volatilities on Star Diamond 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 Star Diamond with a short position of United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Star Diamond and United Insurance.

Diversification Opportunities for Star Diamond and United Insurance

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Star and United is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Star Diamond 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 Star Diamond 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 Star Diamond 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 Star Diamond i.e., Star Diamond and United Insurance go up and down completely randomly.

Pair Corralation between Star Diamond and United Insurance

Assuming the 90 days horizon Star Diamond is expected to generate 6.92 times more return on investment than United Insurance. However, Star Diamond is 6.92 times more volatile than United Insurance Holdings. It trades about 0.07 of its potential returns per unit of risk. United Insurance Holdings is currently generating about 0.2 per unit of risk. If you would invest  1.85  in Star Diamond on August 29, 2024 and sell it today you would lose (0.50) from holding Star Diamond or give up 27.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Star Diamond  vs.  United Insurance Holdings

 Performance 
       Timeline  
Star Diamond 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Star Diamond are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Star Diamond reported solid returns over the last few months and may actually be approaching a breakup point.
United Insurance Holdings 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Star Diamond and United Insurance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Star Diamond and United Insurance

The main advantage of trading using opposite Star Diamond and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Star Diamond 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 Star Diamond 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.
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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