Correlation Between NORTHEAST UTILITIES and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both NORTHEAST UTILITIES 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 NORTHEAST UTILITIES and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NORTHEAST UTILITIES and Universal Insurance Holdings, you can compare the effects of market volatilities on NORTHEAST UTILITIES 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 NORTHEAST UTILITIES with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NORTHEAST UTILITIES and Universal Insurance.
Diversification Opportunities for NORTHEAST UTILITIES and Universal Insurance
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between NORTHEAST and Universal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding NORTHEAST UTILITIES and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and NORTHEAST UTILITIES 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 NORTHEAST UTILITIES 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 NORTHEAST UTILITIES i.e., NORTHEAST UTILITIES and Universal Insurance go up and down completely randomly.
Pair Corralation between NORTHEAST UTILITIES and Universal Insurance
Assuming the 90 days trading horizon NORTHEAST UTILITIES is expected to generate 2.06 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, NORTHEAST UTILITIES is 2.52 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 1,794 in Universal Insurance Holdings on August 31, 2024 and sell it today you would earn a total of 366.00 from holding Universal Insurance Holdings or generate 20.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.23% |
| Values | Daily Returns |
NORTHEAST UTILITIES vs. Universal Insurance Holdings
Performance |
| Timeline |
| NORTHEAST UTILITIES |
| Universal Insurance |
NORTHEAST UTILITIES and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NORTHEAST UTILITIES and Universal Insurance
The main advantage of trading using opposite NORTHEAST UTILITIES and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORTHEAST UTILITIES 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.| NORTHEAST UTILITIES vs. STRAYER EDUCATION | NORTHEAST UTILITIES vs. REINET INVESTMENTS SCA | NORTHEAST UTILITIES vs. Virtus Investment Partners | NORTHEAST UTILITIES vs. Apollo Investment Corp |
| Universal Insurance vs. The Progressive | Universal Insurance vs. Fairfax Financial Holdings | Universal Insurance vs. Insurance Australia Group |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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