Correlation Between HYDROFARM HLD and Universal Insurance

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

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

Diversification Opportunities for HYDROFARM HLD and Universal Insurance

0.07

Correlation Coefficient

HYDROFARM HLD  Universal Insurance

Significant diversification

The 3 months correlation between HYDROFARM and Universal is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HYDROFARM HLD 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 HYDROFARM HLD 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 HYDROFARM HLD 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 HYDROFARM HLD i.e., HYDROFARM HLD and Universal Insurance go up and down completely randomly.

Pair Corralation between HYDROFARM HLD and Universal Insurance

Assuming the 90 days trading horizon HYDROFARM HLD GRP is expected to generate 55.38 times more return on investment than Universal Insurance. However, HYDROFARM HLD is 55.38 times more volatile than Universal Insurance Holdings. It trades about 0.12 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.02 per unit of risk. If you would invest  587.00  in HYDROFARM HLD GRP on December 24, 2024 and sell it today you would lose (57.00) from holding HYDROFARM HLD GRP or give up 9.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

HYDROFARM HLD GRP  vs.  Universal Insurance Holdings

HYDROFARM HLD GRP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HYDROFARM HLD GRP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HYDROFARM HLD reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 1 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HYDROFARM HLD and Universal Insurance

The main advantage of trading using opposite HYDROFARM HLD and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYDROFARM HLD 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 HYDROFARM HLD 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.