Correlation Between Funko and Universal Insurance

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

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

Diversification Opportunities for Funko and Universal Insurance

-0.48

Correlation Coefficient

Funko  Universal Insurance

Very good diversification

The 3 months correlation between Funko and Universal is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Funko Inc and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Funko 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 Funko Inc 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 Funko i.e., Funko and Universal Insurance go up and down completely randomly.

Pair Corralation between Funko and Universal Insurance

Given the investment horizon of 90 days Funko Inc is expected to generate 1.87 times more return on investment than Universal Insurance. However, Funko is 1.87 times more volatile than Universal Insurance Holdings. It trades about 0.4 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.3 per unit of risk. If you would invest  1,142  in Funko Inc on October 8, 2024 and sell it today you would earn a total of  257.00  from holding Funko Inc or generate 22.5% return on investment over 90 days.

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

Funko Inc  vs.  Universal Insurance Holdings

Funko Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Funko Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain forward-looking signals, Funko displayed solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Universal Insurance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Funko and Universal Insurance

The main advantage of trading using opposite Funko and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Funko 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 Funko Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.