Correlation Between Universal Insurance and Advanced Micro

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

Diversification Opportunities for Universal Insurance and Advanced Micro

-0.64

Correlation Coefficient

Universal Insurance  Advanced Micro

Excellent diversification

The 3 months correlation between Universal and Advanced is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Advanced Micro Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Micro Devices 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 Advanced Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Micro Devices has no effect on the direction of Universal Insurance i.e., Universal Insurance and Advanced Micro go up and down completely randomly.

Pair Corralation between Universal Insurance and Advanced Micro

Assuming the 90 days horizon Universal Insurance Holdings is expected to under-perform the Advanced Micro. But the stock apears to be less risky and, when comparing its historical volatility, Universal Insurance Holdings is 1.37 times less risky than Advanced Micro. The stock trades about -0.12 of its potential returns per unit of risk. The Advanced Micro Devices is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12,398  in Advanced Micro Devices on October 9, 2024 and sell it today you would earn a total of  132.00  from holding Advanced Micro Devices or generate 1.06% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  Advanced Micro Devices

Universal Insurance

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Universal Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Advanced Micro Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Micro Devices has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Universal Insurance and Advanced Micro

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

The idea behind Universal Insurance Holdings and Advanced Micro Devices 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.