Correlation Between Universal Insurance and United Utilities
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Universal Insurance and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and United Utilities.
Diversification Opportunities for Universal Insurance and United Utilities
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and United is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Universal Insurance i.e., Universal Insurance and United Utilities go up and down completely randomly.
Pair Corralation between Universal Insurance and United Utilities
Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.75 times more return on investment than United Utilities. However, Universal Insurance is 1.75 times more volatile than United Utilities Group. It trades about 0.08 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of risk. If you would invest 870.00 in Universal Insurance Holdings on September 4, 2024 and sell it today you would earn a total of 1,270 from holding Universal Insurance Holdings or generate 145.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance Holdings vs. United Utilities Group
Performance |
| Timeline |
| Universal Insurance |
| United Utilities |
Universal Insurance and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and United Utilities
The main advantage of trading using opposite Universal Insurance and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Universal Insurance vs. The Progressive | Universal Insurance vs. The Allstate | Universal Insurance vs. PICC Property and | Universal Insurance vs. Fairfax Financial Holdings |
| United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech | United Utilities vs. SIVERS SEMICONDUCTORS AB |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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