Correlation Between RLI Corp and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both RLI Corp 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 RLI Corp and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RLI Corp and Universal Insurance Holdings, you can compare the effects of market volatilities on RLI Corp 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 RLI Corp with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of RLI Corp and Universal Insurance.
Diversification Opportunities for RLI Corp and Universal Insurance
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RLI and Universal is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding RLI Corp and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and RLI Corp 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 RLI Corp 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 RLI Corp i.e., RLI Corp and Universal Insurance go up and down completely randomly.
Pair Corralation between RLI Corp and Universal Insurance
Considering the 90-day investment horizon RLI Corp is expected to generate 1.06 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, RLI Corp is 1.28 times less risky than Universal Insurance. It trades about 0.41 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,994 in Universal Insurance Holdings on September 1, 2024 and sell it today you would earn a total of 269.00 from holding Universal Insurance Holdings or generate 13.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RLI Corp vs. Universal Insurance Holdings
Performance |
| Timeline |
| RLI Corp |
| Universal Insurance |
RLI Corp and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RLI Corp and Universal Insurance
The main advantage of trading using opposite RLI Corp and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLI Corp 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.| RLI Corp vs. Horace Mann Educators | RLI Corp vs. Kemper | RLI Corp vs. Global Indemnity PLC | RLI Corp vs. Argo Group International |
| 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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