Correlation Between Highlight Communications and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Highlight Communications and Universal Insurance 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 Highlight Communications and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and Universal Insurance Holdings, you can compare the effects of market volatilities on Highlight Communications and Universal Insurance 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 Highlight Communications with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and Universal Insurance.
Diversification Opportunities for Highlight Communications and Universal Insurance
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Highlight and Universal is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of Highlight Communications i.e., Highlight Communications and Universal Insurance go up and down completely randomly.
Pair Corralation between Highlight Communications and Universal Insurance
Assuming the 90 days trading horizon Highlight Communications AG is expected to generate 3.81 times more return on investment than Universal Insurance. However, Highlight Communications is 3.81 times more volatile than Universal Insurance Holdings. It trades about 0.25 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.26 per unit of risk. If you would invest 116.00 in Highlight Communications AG on October 11, 2024 and sell it today you would earn a total of 37.00 from holding Highlight Communications AG or generate 31.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. Universal Insurance Holdings
Performance |
| Timeline |
| Highlight Communications |
| Universal Insurance |
Highlight Communications and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and Universal Insurance
The main advantage of trading using opposite Highlight Communications and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications position performs unexpectedly, Universal Insurance 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 Insurance will offset losses from the drop in Universal Insurance's long position.The idea behind Highlight Communications AG and Universal Insurance Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |