Correlation Between Universal Insurance and MGIC INVESTMENT
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and MGIC INVESTMENT 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 MGIC INVESTMENT 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 MGIC INVESTMENT, you can compare the effects of market volatilities on Universal Insurance and MGIC INVESTMENT 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 MGIC INVESTMENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and MGIC INVESTMENT.
Diversification Opportunities for Universal Insurance and MGIC INVESTMENT
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and MGIC is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Universal Insurance i.e., Universal Insurance and MGIC INVESTMENT go up and down completely randomly.
Pair Corralation between Universal Insurance and MGIC INVESTMENT
Assuming the 90 days horizon Universal Insurance Holdings is expected to under-perform the MGIC INVESTMENT. But the stock apears to be less risky and, when comparing its historical volatility, Universal Insurance Holdings is 1.11 times less risky than MGIC INVESTMENT. The stock trades about -0.08 of its potential returns per unit of risk. The MGIC INVESTMENT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,340 in MGIC INVESTMENT on September 15, 2024 and sell it today you would earn a total of 40.00 from holding MGIC INVESTMENT or generate 1.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance Holdings vs. MGIC INVESTMENT
Performance |
| Timeline |
| Universal Insurance |
| MGIC INVESTMENT |
Universal Insurance and MGIC INVESTMENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and MGIC INVESTMENT
The main advantage of trading using opposite Universal Insurance and MGIC INVESTMENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, MGIC INVESTMENT 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 MGIC INVESTMENT will offset losses from the drop in MGIC INVESTMENT's long position.| Universal Insurance vs. Insurance Australia Group | Universal Insurance vs. Superior Plus Corp | Universal Insurance vs. SIVERS SEMICONDUCTORS AB | Universal Insurance vs. CHINA HUARONG ENERHD 50 |
| MGIC INVESTMENT vs. Sterling Construction | MGIC INVESTMENT vs. Singapore Reinsurance | MGIC INVESTMENT vs. REVO INSURANCE SPA | MGIC INVESTMENT vs. Universal Insurance Holdings |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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