Correlation Between Universal Insurance and Rock Tech

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

Diversification Opportunities for Universal Insurance and Rock Tech

-0.64

Correlation Coefficient

Universal Insurance  Rock Tech

Excellent diversification

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

Pair Corralation between Universal Insurance and Rock Tech

Assuming the 90 days horizon Universal Insurance Holdings is expected to under-perform the Rock Tech. But the stock apears to be less risky and, when comparing its historical volatility, Universal Insurance Holdings is 3.91 times less risky than Rock Tech. The stock trades about -0.21 of its potential returns per unit of risk. The Rock Tech Lithium is currently generating about 0.63 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Rock Tech Lithium on October 15, 2024 and sell it today you would earn a total of  47.00  from holding Rock Tech Lithium or generate 90.38% 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.  Rock Tech Lithium

Universal Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 6 (%) 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 February 2025.

Rock Tech Lithium

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rock Tech Lithium are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward indicators, Rock Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Insurance and Rock Tech

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

The idea behind Universal Insurance Holdings and Rock Tech Lithium 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .