Correlation Between Universal Insurance and MGP Ingredients
Can any of the company-specific risk be diversified away by investing in both Universal Insurance and MGP Ingredients 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 MGP Ingredients 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 MGP Ingredients, you can compare the effects of market volatilities on Universal Insurance and MGP Ingredients 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 MGP Ingredients. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and MGP Ingredients.
Diversification Opportunities for Universal Insurance and MGP Ingredients
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and MGP is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and MGP Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGP Ingredients 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 MGP Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGP Ingredients has no effect on the direction of Universal Insurance i.e., Universal Insurance and MGP Ingredients go up and down completely randomly.
Pair Corralation between Universal Insurance and MGP Ingredients
Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 0.52 times more return on investment than MGP Ingredients. However, Universal Insurance Holdings is 1.93 times less risky than MGP Ingredients. It trades about 0.1 of its potential returns per unit of risk. MGP Ingredients is currently generating about -0.27 per unit of risk. If you would invest 1,717 in Universal Insurance Holdings on October 12, 2024 and sell it today you would earn a total of 193.00 from holding Universal Insurance Holdings or generate 11.24% 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. MGP Ingredients
Performance |
Timeline |
Universal Insurance |
MGP Ingredients |
Universal Insurance and MGP Ingredients Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Universal Insurance and MGP Ingredients
The main advantage of trading using opposite Universal Insurance and MGP Ingredients positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, MGP Ingredients 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 MGP Ingredients will offset losses from the drop in MGP Ingredients' long position.The idea behind Universal Insurance Holdings and MGP Ingredients 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.
MGP Ingredients vs. MYFAIR GOLD P | MGP Ingredients vs. Alaska Air Group | MGP Ingredients vs. Pentair plc | MGP Ingredients vs. Ribbon Communications |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Money Managers Screen money managers from public funds and ETFs managed around the world | |
Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data |