Correlation Between Microsoft and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Universal Insurance Holdings, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Universal Insurance.
Diversification Opportunities for Microsoft and Universal Insurance
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and Universal is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Universal Insurance go up and down completely randomly.
Pair Corralation between Microsoft and Universal Insurance
Given the investment horizon of 90 days Microsoft is expected to generate 1.76 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, Microsoft is 2.09 times less risky than Universal Insurance. It trades about 0.08 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,029 in Universal Insurance Holdings on August 25, 2024 and sell it today you would earn a total of 1,259 from holding Universal Insurance Holdings or generate 122.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Microsoft vs. Universal Insurance Holdings
Performance |
| Timeline |
| Microsoft |
| Universal Insurance |
Microsoft and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Universal Insurance
The main advantage of trading using opposite Microsoft and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| Universal Insurance vs. HCI Group | Universal Insurance vs. Kingstone Companies | Universal Insurance vs. Horace Mann Educators | Universal Insurance vs. Heritage Insurance Hldgs |
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.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |