Correlation Between Universal Insurance and BJs Restaurants
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and BJs Restaurants 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 BJs Restaurants 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 BJs Restaurants, you can compare the effects of market volatilities on Universal Insurance and BJs Restaurants 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 BJs Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and BJs Restaurants.
Diversification Opportunities for Universal Insurance and BJs Restaurants
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and BJs is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and BJs Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Restaurants 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 BJs Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Restaurants has no effect on the direction of Universal Insurance i.e., Universal Insurance and BJs Restaurants go up and down completely randomly.
Pair Corralation between Universal Insurance and BJs Restaurants
Assuming the 90 days horizon Universal Insurance Holdings is expected to under-perform the BJs Restaurants. But the stock apears to be less risky and, when comparing its historical volatility, Universal Insurance Holdings is 2.17 times less risky than BJs Restaurants. The stock trades about -0.32 of its potential returns per unit of risk. The BJs Restaurants is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,560 in BJs Restaurants on October 1, 2024 and sell it today you would lose (160.00) from holding BJs Restaurants or give up 4.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Insurance Holdings vs. BJs Restaurants
Performance |
| Timeline |
| Universal Insurance |
| BJs Restaurants |
Universal Insurance and BJs Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Insurance and BJs Restaurants
The main advantage of trading using opposite Universal Insurance and BJs Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, BJs Restaurants 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 BJs Restaurants will offset losses from the drop in BJs Restaurants' long position.| Universal Insurance vs. CVS Health | Universal Insurance vs. FEMALE HEALTH | Universal Insurance vs. Cardinal Health | Universal Insurance vs. Ramsay Health Care |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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