Correlation Between Snap and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Universal Insurance Holdings, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Universal Insurance.
Diversification Opportunities for Snap and Universal Insurance
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Snap and Universal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Snap 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 Snap Inc 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 Snap i.e., Snap and Universal Insurance go up and down completely randomly.
Pair Corralation between Snap and Universal Insurance
Given the investment horizon of 90 days Snap is expected to generate 1.3 times less return on investment than Universal Insurance. In addition to that, Snap is 2.56 times more volatile than Universal Insurance Holdings. It trades about 0.1 of its total potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.33 per unit of volatility. If you would invest 2,000 in Universal Insurance Holdings on August 29, 2024 and sell it today you would earn a total of 272.00 from holding Universal Insurance Holdings or generate 13.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. Universal Insurance Holdings
Performance |
| Timeline |
| Snap Inc |
| Universal Insurance |
Snap and Universal Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Universal Insurance
The main advantage of trading using opposite Snap and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc 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.| 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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