Correlation Between Japan Post and Universal Insurance

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

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

Diversification Opportunities for Japan Post and Universal Insurance

0.74

Correlation Coefficient

Japan Post  Universal Insurance

Poor diversification

The 3 months correlation between Japan and Universal is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Insurance and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Japan Post 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 Japan Post Insurance 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 Japan Post i.e., Japan Post and Universal Insurance go up and down completely randomly.

Pair Corralation between Japan Post and Universal Insurance

Assuming the 90 days trading horizon Japan Post Insurance is expected to generate 0.67 times more return on investment than Universal Insurance. However, Japan Post Insurance is 1.5 times less risky than Universal Insurance. It trades about 0.12 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.08 per unit of risk. If you would invest  1,710  in Japan Post Insurance on September 1, 2024 and sell it today you would earn a total of  250.00  from holding Japan Post Insurance or generate 14.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Japan Post Insurance  vs.  Universal Insurance Holdings

Japan Post Insurance

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Insurance are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Japan Post unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Post and Universal Insurance

The main advantage of trading using opposite Japan Post and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Post 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 Japan Post Insurance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.