Correlation Between Kingstone Companies and Heritage Insurance

Can any of the company-specific risk be diversified away by investing in both Kingstone Companies and Heritage 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 Kingstone Companies and Heritage Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingstone Companies and Heritage Insurance Hldgs, you can compare the effects of market volatilities on Kingstone Companies and Heritage 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 Kingstone Companies with a short position of Heritage Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingstone Companies and Heritage Insurance.

Diversification Opportunities for Kingstone Companies and Heritage Insurance

-0.23

Correlation Coefficient

Kingstone Companies  Heritage Insurance

Very good diversification

The 3 months correlation between Kingstone and Heritage is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kingstone Companies and Heritage Insurance Hldgs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Insurance Hldgs and Kingstone Companies 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 Kingstone Companies are associated (or correlated) with Heritage Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Insurance Hldgs has no effect on the direction of Kingstone Companies i.e., Kingstone Companies and Heritage Insurance go up and down completely randomly.

Pair Corralation between Kingstone Companies and Heritage Insurance

Given the investment horizon of 90 days Kingstone Companies is expected to generate 1.0 times more return on investment than Heritage Insurance. However, Kingstone Companies is 1.0 times more volatile than Heritage Insurance Hldgs. It trades about 0.12 of its potential returns per unit of risk. Heritage Insurance Hldgs is currently generating about 0.09 per unit of risk. If you would invest  172.00  in Kingstone Companies on September 4, 2024 and sell it today you would earn a total of  1,454  from holding Kingstone Companies or generate 845.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kingstone Companies  vs.  Heritage Insurance Hldgs

Kingstone Companies

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingstone Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Heritage Insurance Hldgs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Insurance Hldgs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kingstone Companies and Heritage Insurance

The main advantage of trading using opposite Kingstone Companies and Heritage Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingstone Companies position performs unexpectedly, Heritage 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 Heritage Insurance will offset losses from the drop in Heritage Insurance's long position.

The idea behind Kingstone Companies and Heritage Insurance Hldgs 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.