Correlation Between Huize Holding and Erie Indemnity

Can any of the company-specific risk be diversified away by investing in both Huize Holding and Erie Indemnity 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 Huize Holding and Erie Indemnity into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Huize Holding and Erie Indemnity, you can compare the effects of market volatilities on Huize Holding and Erie Indemnity 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 Huize Holding with a short position of Erie Indemnity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huize Holding and Erie Indemnity.

Diversification Opportunities for Huize Holding and Erie Indemnity

0.23

Correlation Coefficient

Huize Holding  Erie Indemnity

Modest diversification

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

Pair Corralation between Huize Holding and Erie Indemnity

Given the investment horizon of 90 days Huize Holding is expected to under-perform the Erie Indemnity. In addition to that, Huize Holding is 2.0 times more volatile than Erie Indemnity. It trades about -0.18 of its total potential returns per unit of risk. Erie Indemnity is currently generating about 0.0 per unit of volatility. If you would invest  38,790  in Erie Indemnity on January 9, 2025 and sell it today you would lose (739.00) from holding Erie Indemnity or give up 1.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Huize Holding  vs.  Erie Indemnity

Huize Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huize Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Erie Indemnity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Erie Indemnity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Erie Indemnity is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Huize Holding and Erie Indemnity

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

The idea behind Huize Holding and Erie Indemnity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.