Correlation Between Universal Insurance and Rai Way
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Rai Way 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 Universal Insurance and Rai Way into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Insurance Holdings and Rai Way SpA, you can compare the effects of market volatilities on Universal Insurance and Rai Way 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 Universal Insurance with a short position of Rai Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Rai Way.
Diversification Opportunities for Universal Insurance and Rai Way
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Rai is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA and Universal 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 Universal Insurance Holdings are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of Universal Insurance i.e., Universal Insurance and Rai Way go up and down completely randomly.
Pair Corralation between Universal Insurance and Rai Way
Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.43 times more return on investment than Rai Way. However, Universal Insurance is 1.43 times more volatile than Rai Way SpA. It trades about 0.35 of its potential returns per unit of risk. Rai Way SpA is currently generating about -0.1 per unit of risk. If you would invest 1,840 in Universal Insurance Holdings on August 31, 2024 and sell it today you would earn a total of 320.00 from holding Universal Insurance Holdings or generate 17.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance Holdings vs. Rai Way SpA
Performance |
| Timeline |
| Universal Insurance |
| Rai Way SpA |
Universal Insurance and Rai Way Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Rai Way
The main advantage of trading using opposite Universal Insurance and Rai Way positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Rai Way 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 Rai Way will offset losses from the drop in Rai Way's long position.| Universal Insurance vs. The Progressive | Universal Insurance vs. Fairfax Financial Holdings | Universal Insurance vs. Admiral Group plc | Universal Insurance vs. Insurance Australia Group |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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