Correlation Between Universal Insurance and Paychex

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

Diversification Opportunities for Universal Insurance and Paychex

0.06

Correlation Coefficient

Universal Insurance  Paychex

Significant diversification

The 3 months correlation between Universal and Paychex is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Paychex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paychex 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 Paychex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paychex has no effect on the direction of Universal Insurance i.e., Universal Insurance and Paychex go up and down completely randomly.

Pair Corralation between Universal Insurance and Paychex

Assuming the 90 days horizon Universal Insurance Holdings is expected to generate 1.33 times more return on investment than Paychex. However, Universal Insurance is 1.33 times more volatile than Paychex. It trades about 0.07 of its potential returns per unit of risk. Paychex is currently generating about 0.05 per unit of risk. If you would invest  1,946  in Universal Insurance Holdings on December 30, 2024 and sell it today you would earn a total of  154.00  from holding Universal Insurance Holdings or generate 7.91% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  Paychex

Universal Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 5 (%) 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 April 2025.

Paychex

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Paychex are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Paychex is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Insurance and Paychex

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

The idea behind Universal Insurance Holdings and Paychex 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.