Correlation Between IKEJA HOTELS and UNIVERSAL INSURANCE

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

By analyzing existing cross correlation between IKEJA HOTELS PLC and UNIVERSAL INSURANCE PANY, you can compare the effects of market volatilities on IKEJA HOTELS 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 IKEJA HOTELS with a short position of UNIVERSAL INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of IKEJA HOTELS and UNIVERSAL INSURANCE.

Diversification Opportunities for IKEJA HOTELS and UNIVERSAL INSURANCE

-0.59

Correlation Coefficient

IKEJA HOTELS  UNIVERSAL INSURANCE

Excellent diversification

The 3 months correlation between IKEJA and UNIVERSAL is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding IKEJA HOTELS PLC and UNIVERSAL INSURANCE PANY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL INSURANCE PANY and IKEJA HOTELS 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 IKEJA HOTELS PLC 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 PANY has no effect on the direction of IKEJA HOTELS i.e., IKEJA HOTELS and UNIVERSAL INSURANCE go up and down completely randomly.

Pair Corralation between IKEJA HOTELS and UNIVERSAL INSURANCE

Assuming the 90 days trading horizon IKEJA HOTELS PLC is expected to generate 0.89 times more return on investment than UNIVERSAL INSURANCE. However, IKEJA HOTELS PLC is 1.13 times less risky than UNIVERSAL INSURANCE. It trades about 0.14 of its potential returns per unit of risk. UNIVERSAL INSURANCE PANY is currently generating about 0.0 per unit of risk. If you would invest  700.00  in IKEJA HOTELS PLC on September 16, 2024 and sell it today you would earn a total of  180.00  from holding IKEJA HOTELS PLC or generate 25.71% return on investment over 90 days.

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

IKEJA HOTELS PLC  vs.  UNIVERSAL INSURANCE PANY

IKEJA HOTELS PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IKEJA HOTELS PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, IKEJA HOTELS displayed solid returns over the last few months and may actually be approaching a breakup point.

UNIVERSAL INSURANCE PANY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIVERSAL INSURANCE PANY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, UNIVERSAL INSURANCE is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IKEJA HOTELS and UNIVERSAL INSURANCE

The main advantage of trading using opposite IKEJA HOTELS and UNIVERSAL INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IKEJA HOTELS 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 IKEJA HOTELS PLC and UNIVERSAL INSURANCE PANY 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.