Correlation Between Crescent Star and Universal Insurance

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

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

Diversification Opportunities for Crescent Star and Universal Insurance

0.68

Correlation Coefficient

Crescent Star  Universal Insurance

Poor diversification

The 3 months correlation between Crescent and Universal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance and Universal Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Crescent Star 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 Crescent Star Insurance 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 Crescent Star i.e., Crescent Star and Universal Insurance go up and down completely randomly.

Pair Corralation between Crescent Star and Universal Insurance

Assuming the 90 days trading horizon Crescent Star is expected to generate 2.15 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, Crescent Star Insurance is 1.13 times less risky than Universal Insurance. It trades about 0.07 of its potential returns per unit of risk. Universal Insurance is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  826.00  in Universal Insurance on October 11, 2024 and sell it today you would earn a total of  186.00  from holding Universal Insurance or generate 22.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Crescent Star Insurance  vs.  Universal Insurance

Crescent Star Insurance

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Star may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Universal Insurance

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance are ranked lower than 13 (%) 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 Crescent Star and Universal Insurance

The main advantage of trading using opposite Crescent Star and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Star 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 Crescent Star Insurance 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.