Correlation Between Universal Insurance and Vulcan Materials
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials, you can compare the effects of market volatilities on Universal Insurance and Vulcan Materials 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 Vulcan Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Vulcan Materials.
Diversification Opportunities for Universal Insurance and Vulcan Materials
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and Vulcan is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of Universal Insurance i.e., Universal Insurance and Vulcan Materials go up and down completely randomly.
Pair Corralation between Universal Insurance and Vulcan Materials
Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 0.79 times more return on investment than Vulcan Materials. However, Universal Insurance Holdings is 1.26 times less risky than Vulcan Materials. It trades about 0.41 of its potential returns per unit of risk. Vulcan Materials is currently generating about 0.23 per unit of risk. If you would invest 1,780 in Universal Insurance Holdings on August 28, 2024 and sell it today you would earn a total of 360.00 from holding Universal Insurance Holdings or generate 20.22% 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. Vulcan Materials
Performance |
| Timeline |
| Universal Insurance |
| Vulcan Materials |
Universal Insurance and Vulcan Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and Vulcan Materials
The main advantage of trading using opposite Universal Insurance and Vulcan Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Vulcan Materials 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 Vulcan Materials will offset losses from the drop in Vulcan Materials' long position.| Universal Insurance vs. Superior Plus Corp | Universal Insurance vs. NMI Holdings | Universal Insurance vs. Origin Agritech | Universal Insurance vs. SIVERS SEMICONDUCTORS AB |
| Vulcan Materials vs. HeidelbergCement AG | Vulcan Materials vs. Superior Plus Corp | Vulcan Materials vs. NMI Holdings | Vulcan Materials vs. Origin Agritech |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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