Correlation Between INSURANCE AUST and Universal Insurance

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

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

Diversification Opportunities for INSURANCE AUST and Universal Insurance

0.74

Correlation Coefficient

INSURANCE AUST  Universal Insurance

Poor diversification

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

Pair Corralation between INSURANCE AUST and Universal Insurance

Assuming the 90 days trading horizon INSURANCE AUST GRP is expected to generate 0.55 times more return on investment than Universal Insurance. However, INSURANCE AUST GRP is 1.82 times less risky than Universal Insurance. It trades about 0.1 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.01 per unit of risk. If you would invest  458.00  in INSURANCE AUST GRP on September 19, 2024 and sell it today you would earn a total of  47.00  from holding INSURANCE AUST GRP or generate 10.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

INSURANCE AUST GRP  vs.  Universal Insurance Holdings

INSURANCE AUST GRP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Universal Insurance

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Universal Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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 INSURANCE AUST and Universal Insurance

The main advantage of trading using opposite INSURANCE AUST and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INSURANCE AUST 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 INSURANCE AUST GRP 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.