Correlation Between United Bank and United Insurance
Can any of the company-specific risk be diversified away by investing in both United Bank 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 United Bank and United Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bank and United Insurance, you can compare the effects of market volatilities on United Bank 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 United Bank with a short position of United Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bank and United Insurance.
Diversification Opportunities for United Bank and United Insurance
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and United is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Bank and United Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Insurance and United Bank 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 United Bank 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 has no effect on the direction of United Bank i.e., United Bank and United Insurance go up and down completely randomly.
Pair Corralation between United Bank and United Insurance
Assuming the 90 days trading horizon United Bank is expected to generate 0.7 times more return on investment than United Insurance. However, United Bank is 1.43 times less risky than United Insurance. It trades about 0.22 of its potential returns per unit of risk. United Insurance is currently generating about 0.13 per unit of risk. If you would invest 6,830 in United Bank on November 19, 2024 and sell it today you would earn a total of 34,026 from holding United Bank or generate 498.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.27% |
| Values | Daily Returns |
United Bank vs. United Insurance
Performance |
| Timeline |
| United Bank |
| United Insurance |
United Bank and United Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bank and United Insurance
The main advantage of trading using opposite United Bank and United Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bank 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.| United Bank vs. Reliance Insurance Co | United Bank vs. Ghandhara Automobile | United Bank vs. MCB Investment Manag | United Bank vs. Supernet Technologie |
| United Insurance vs. Aisha Steel Mills | United Insurance vs. TPL Insurance | United Insurance vs. Habib Insurance | United Insurance vs. ITTEFAQ Iron Industries |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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