Correlation Between Universal Insurance and MSAD INSURANCE
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and MSAD 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 Universal Insurance and MSAD INSURANCE 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 MSAD INSURANCE, you can compare the effects of market volatilities on Universal Insurance and MSAD 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 Universal Insurance with a short position of MSAD INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and MSAD INSURANCE.
Diversification Opportunities for Universal Insurance and MSAD INSURANCE
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Universal and MSAD is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and MSAD INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD INSURANCE 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 MSAD INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD INSURANCE has no effect on the direction of Universal Insurance i.e., Universal Insurance and MSAD INSURANCE go up and down completely randomly.
Pair Corralation between Universal Insurance and MSAD INSURANCE
Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.59 times more return on investment than MSAD INSURANCE. However, Universal Insurance is 1.59 times more volatile than MSAD INSURANCE. It trades about 0.34 of its potential returns per unit of risk. MSAD INSURANCE is currently generating about 0.09 per unit of risk. If you would invest 1,760 in Universal Insurance Holdings on August 24, 2024 and sell it today you would earn a total of 360.00 from holding Universal Insurance Holdings or generate 20.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance Holdings vs. MSAD INSURANCE
Performance |
| Timeline |
| Universal Insurance |
| MSAD INSURANCE |
Universal Insurance and MSAD INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and MSAD INSURANCE
The main advantage of trading using opposite Universal Insurance and MSAD INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, MSAD 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 MSAD INSURANCE will offset losses from the drop in MSAD INSURANCE's long position.| Universal Insurance vs. QBE Insurance Group | Universal Insurance vs. Insurance Australia Group | Universal Insurance vs. Superior Plus Corp | Universal Insurance vs. NMI Holdings |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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