Correlation Between IDP EDUCATION and Universal Insurance

Can any of the company-specific risk be diversified away by investing in both IDP EDUCATION 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 IDP EDUCATION and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IDP EDUCATION LTD and Universal Insurance Holdings, you can compare the effects of market volatilities on IDP EDUCATION 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 IDP EDUCATION with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of IDP EDUCATION and Universal Insurance.

Diversification Opportunities for IDP EDUCATION and Universal Insurance

-0.47

Correlation Coefficient

IDP EDUCATION  Universal Insurance

Very good diversification

The 3 months correlation between IDP and Universal is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding IDP EDUCATION LTD and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and IDP EDUCATION 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 IDP EDUCATION LTD 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 IDP EDUCATION i.e., IDP EDUCATION and Universal Insurance go up and down completely randomly.

Pair Corralation between IDP EDUCATION and Universal Insurance

Assuming the 90 days horizon IDP EDUCATION LTD is expected to under-perform the Universal Insurance. In addition to that, IDP EDUCATION is 1.03 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 0.03 per unit of volatility. If you would invest  1,945  in Universal Insurance Holdings on September 30, 2024 and sell it today you would earn a total of  55.00  from holding Universal Insurance Holdings or generate 2.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

IDP EDUCATION LTD  vs.  Universal Insurance Holdings

IDP EDUCATION LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDP EDUCATION LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Universal Insurance

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IDP EDUCATION and Universal Insurance

The main advantage of trading using opposite IDP EDUCATION and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IDP EDUCATION 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 IDP EDUCATION LTD 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.

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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.