Correlation Between Universal Insurance and Reinsurance Group

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

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

Diversification Opportunities for Universal Insurance and Reinsurance Group

0.71

Correlation Coefficient

Universal Insurance  Reinsurance Group

Poor diversification

The 3 months correlation between Universal and Reinsurance is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Reinsurance Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reinsurance Group and Universal Insurance 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 Universal Insurance Holdings are associated (or correlated) with Reinsurance Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reinsurance Group has no effect on the direction of Universal Insurance i.e., Universal Insurance and Reinsurance Group go up and down completely randomly.

Pair Corralation between Universal Insurance and Reinsurance Group

Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.37 times more return on investment than Reinsurance Group. However, Universal Insurance is 1.37 times more volatile than Reinsurance Group of. It trades about 0.08 of its potential returns per unit of risk. Reinsurance Group of is currently generating about 0.07 per unit of risk. If you would invest  1,920  in Universal Insurance Holdings on September 1, 2024 and sell it today you would earn a total of  240.00  from holding Universal Insurance Holdings or generate 12.5% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  Reinsurance Group of

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.

Reinsurance Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reinsurance Group of are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Reinsurance Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Universal Insurance and Reinsurance Group

The main advantage of trading using opposite Universal Insurance and Reinsurance Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, Reinsurance Group 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 Reinsurance Group will offset losses from the drop in Reinsurance Group's long position.

The idea behind Universal Insurance Holdings and Reinsurance Group of 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.

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 CEOs Directory module to screen CEOs from public companies around the world.