Correlation Between Universal Insurance and AEGEAN AIRLINES

Can any of the company-specific risk be diversified away by investing in both Universal Insurance and AEGEAN AIRLINES 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 AEGEAN AIRLINES 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 AEGEAN AIRLINES, you can compare the effects of market volatilities on Universal Insurance and AEGEAN AIRLINES 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 AEGEAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and AEGEAN AIRLINES.

Diversification Opportunities for Universal Insurance and AEGEAN AIRLINES

-0.51

Correlation Coefficient

Universal Insurance  AEGEAN AIRLINES

Excellent diversification

The 3 months correlation between Universal and AEGEAN is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Universal Insurance i.e., Universal Insurance and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between Universal Insurance and AEGEAN AIRLINES

Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.7 times more return on investment than AEGEAN AIRLINES. However, Universal Insurance is 1.7 times more volatile than AEGEAN AIRLINES. It trades about 0.06 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.0 per unit of risk. If you would invest  1,421  in Universal Insurance Holdings on September 14, 2024 and sell it today you would earn a total of  579.00  from holding Universal Insurance Holdings or generate 40.75% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  AEGEAN AIRLINES

Universal Insurance

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Universal Insurance and AEGEAN AIRLINES

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

The idea behind Universal Insurance Holdings and AEGEAN AIRLINES 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.