Correlation Between Japan Medical and Universal Insurance

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

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

Diversification Opportunities for Japan Medical and Universal Insurance

-0.12

Correlation Coefficient

Japan Medical  Universal Insurance

Good diversification

The 3 months correlation between Japan and Universal is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Japan Medical 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 Japan Medical Dynamic 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 Japan Medical i.e., Japan Medical and Universal Insurance go up and down completely randomly.

Pair Corralation between Japan Medical and Universal Insurance

Assuming the 90 days horizon Japan Medical is expected to generate 3.62 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, Japan Medical Dynamic is 1.15 times less risky than Universal Insurance. It trades about 0.02 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,946  in Universal Insurance Holdings on December 30, 2024 and sell it today you would earn a total of  154.00  from holding Universal Insurance Holdings or generate 7.91% return on investment over 90 days.

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

Japan Medical Dynamic  vs.  Universal Insurance Holdings

Japan Medical Dynamic

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Medical Dynamic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Medical is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Universal Insurance

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Insurance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Japan Medical and Universal Insurance

The main advantage of trading using opposite Japan Medical and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Medical 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 Japan Medical Dynamic 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.