Correlation Between Energy and Universal Insurance

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

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

Diversification Opportunities for Energy and Universal Insurance

0.19

Correlation Coefficient

Energy  Universal Insurance

Average diversification

The 3 months correlation between Energy and Universal is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Energy and Environmental and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Energy 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 Energy and Environmental 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 Energy i.e., Energy and Universal Insurance go up and down completely randomly.

Pair Corralation between Energy and Universal Insurance

Given the investment horizon of 90 days Energy and Environmental is expected to under-perform the Universal Insurance. In addition to that, Energy is 4.28 times more volatile than Universal Insurance Holdings. It trades about -0.09 of its total potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.26 per unit of volatility. If you would invest  2,122  in Universal Insurance Holdings on October 11, 2024 and sell it today you would lose (155.00) from holding Universal Insurance Holdings or give up 7.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Energy and Environmental  vs.  Universal Insurance Holdings

Energy and Environmental

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy and Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Universal Insurance

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Universal Insurance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Energy and Universal Insurance

The main advantage of trading using opposite Energy and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy 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 Energy and Environmental and Universal Insurance Holdings 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.