Correlation Between Universal Insurance and Universal Display
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Universal Display 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 Universal Display 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 Universal Display, you can compare the effects of market volatilities on Universal Insurance and Universal Display 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 Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Universal Display.
Diversification Opportunities for Universal Insurance and Universal Display
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Universal and Universal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Universal Display in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display has no effect on the direction of Universal Insurance i.e., Universal Insurance and Universal Display go up and down completely randomly.
Pair Corralation between Universal Insurance and Universal Display
Assuming the 90 days horizon Universal Insurance is expected to generate 1.78 times less return on investment than Universal Display. But when comparing it to its historical volatility, Universal Insurance Holdings is 1.53 times less risky than Universal Display. It trades about 0.1 of its potential returns per unit of risk. Universal Display is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 14,175 in Universal Display on November 28, 2024 and sell it today you would earn a total of 815.00 from holding Universal Display or generate 5.75% 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. Universal Display
Performance |
| Timeline |
| Universal Insurance |
| Universal Display |
Universal Insurance and Universal Display Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Universal Display
The main advantage of trading using opposite Universal Insurance and Universal Display positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Universal Display 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 Universal Display will offset losses from the drop in Universal Display's long position.| Universal Insurance vs. SPORT LISBOA E | Universal Insurance vs. Columbia Sportswear | Universal Insurance vs. ANTA Sports Products | Universal Insurance vs. GUILD ESPORTS PLC |
| Universal Display vs. Host Hotels Resorts | Universal Display vs. Western Copper and | Universal Display vs. InterContinental Hotels Group | Universal Display vs. MHP Hotel AG |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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