Correlation Between PLAYMATES TOYS and Universal Insurance

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

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

Diversification Opportunities for PLAYMATES TOYS and Universal Insurance

-0.56

Correlation Coefficient

PLAYMATES TOYS  Universal Insurance

Excellent diversification

The 3 months correlation between PLAYMATES and Universal is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding PLAYMATES TOYS and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and PLAYMATES TOYS 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 PLAYMATES TOYS 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 PLAYMATES TOYS i.e., PLAYMATES TOYS and Universal Insurance go up and down completely randomly.

Pair Corralation between PLAYMATES TOYS and Universal Insurance

Assuming the 90 days trading horizon PLAYMATES TOYS is expected to generate 3.55 times more return on investment than Universal Insurance. However, PLAYMATES TOYS is 3.55 times more volatile than Universal Insurance Holdings. It trades about -0.02 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.18 per unit of risk. If you would invest  6.90  in PLAYMATES TOYS on October 24, 2024 and sell it today you would lose (0.40) from holding PLAYMATES TOYS or give up 5.8% of portfolio value over 90 days.

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

PLAYMATES TOYS  vs.  Universal Insurance Holdings

PLAYMATES TOYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PLAYMATES TOYS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Universal Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 3 (%) 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 PLAYMATES TOYS and Universal Insurance

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

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.