Correlation Between AGP and Universal Insurance

Can any of the company-specific risk be diversified away by investing in both AGP and Universal Insurance 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 AGP and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AGP and Universal Insurance, you can compare the effects of market volatilities on AGP and Universal Insurance 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 AGP with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGP and Universal Insurance.

Diversification Opportunities for AGP and Universal Insurance

0.87

Correlation Coefficient

AGP  Universal Insurance

Very poor diversification

The 3 months correlation between AGP and Universal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AGP and Universal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and AGP 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 AGP are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of AGP i.e., AGP and Universal Insurance go up and down completely randomly.

Pair Corralation between AGP and Universal Insurance

Assuming the 90 days trading horizon AGP is expected to generate 1.13 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, AGP is 2.14 times less risky than Universal Insurance. It trades about 0.2 of its potential returns per unit of risk. Universal Insurance is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  712.00  in Universal Insurance on September 29, 2024 and sell it today you would earn a total of  473.00  from holding Universal Insurance or generate 66.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.4%
Values	Daily Returns

AGP  vs.  Universal Insurance

AGP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AGP are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AGP reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Universal Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGP and Universal Insurance

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

The idea behind AGP and Universal Insurance 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.