Correlation Between Universal Insurance and RTL Group

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

Diversification Opportunities for Universal Insurance and RTL Group

0.23

Correlation Coefficient

Universal Insurance  RTL Group

Modest diversification

The 3 months correlation between Universal and RTL is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of Universal Insurance i.e., Universal Insurance and RTL Group go up and down completely randomly.

Pair Corralation between Universal Insurance and RTL Group

Assuming the 90 days horizon Universal Insurance is expected to generate 15.29 times less return on investment than RTL Group. In addition to that, Universal Insurance is 1.12 times more volatile than RTL Group SA. It trades about 0.02 of its total potential returns per unit of risk. RTL Group SA is currently generating about 0.28 per unit of volatility. If you would invest  2,630  in RTL Group SA on December 22, 2024 and sell it today you would earn a total of  935.00  from holding RTL Group SA or generate 35.55% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  RTL Group SA

Universal Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

RTL Group SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, RTL Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Insurance and RTL Group

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

The idea behind Universal Insurance Holdings and RTL Group SA 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.