Correlation Between United Insurance and Central Japan

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

By analyzing existing cross correlation between United Insurance Holdings and Central Japan Railway, you can compare the effects of market volatilities on United Insurance and Central Japan 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 Insurance with a short position of Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and Central Japan.

Diversification Opportunities for United Insurance and Central Japan

0.0

Correlation Coefficient

United Insurance  Central Japan

Pay attention - limited upside

The 3 months correlation between United and Central is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway and United Insurance 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 Insurance Holdings are associated (or correlated) with Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of United Insurance i.e., United Insurance and Central Japan go up and down completely randomly.

Pair Corralation between United Insurance and Central Japan

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the Central Japan. In addition to that, United Insurance is 1.23 times more volatile than Central Japan Railway. It trades about -0.03 of its total potential returns per unit of risk. Central Japan Railway is currently generating about 0.08 per unit of volatility. If you would invest  1,774  in Central Japan Railway on April 24, 2025 and sell it today you would earn a total of  148.00  from holding Central Japan Railway or generate 8.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

United Insurance Holdings  vs.  Central Japan Railway

United Insurance Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, United Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Central Japan Railway

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Central Japan Railway are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Central Japan may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with United Insurance and Central Japan

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

The idea behind United Insurance Holdings and Central Japan Railway 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.