Correlation Between Universal Insurance and YAMAHA CORP

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

Diversification Opportunities for Universal Insurance and YAMAHA CORP

0.4

Correlation Coefficient

Universal Insurance  YAMAHA CORP

Very weak diversification

The 3 months correlation between Universal and YAMAHA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and YAMAHA P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAMAHA CORP 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 YAMAHA CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAMAHA CORP has no effect on the direction of Universal Insurance i.e., Universal Insurance and YAMAHA CORP go up and down completely randomly.

Pair Corralation between Universal Insurance and YAMAHA CORP

Assuming the 90 days horizon Universal Insurance is expected to generate 11.16 times less return on investment than YAMAHA CORP. In addition to that, Universal Insurance is 1.4 times more volatile than YAMAHA P. It trades about 0.01 of its total potential returns per unit of risk. YAMAHA P is currently generating about 0.13 per unit of volatility. If you would invest  678.00  in YAMAHA P on December 22, 2024 and sell it today you would earn a total of  81.00  from holding YAMAHA P or generate 11.95% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  YAMAHA P

Universal Insurance

Risk-Adjusted Performance

Weak

Over the last 90 days Universal Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

YAMAHA CORP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in YAMAHA P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, YAMAHA CORP may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Universal Insurance and YAMAHA CORP

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

The idea behind Universal Insurance Holdings and YAMAHA P 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.