Correlation Between Kingstone Companies and Universal Insurance

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

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

Diversification Opportunities for Kingstone Companies and Universal Insurance

0.48

Correlation Coefficient

Kingstone Companies  Universal Insurance

Very weak diversification

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

Pair Corralation between Kingstone Companies and Universal Insurance

Given the investment horizon of 90 days Kingstone Companies is expected to generate 1.12 times more return on investment than Universal Insurance. However, Kingstone Companies is 1.12 times more volatile than Universal Insurance Holdings. It trades about 0.26 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.05 per unit of risk. If you would invest  904.00  in Kingstone Companies on September 2, 2024 and sell it today you would earn a total of  771.00  from holding Kingstone Companies or generate 85.29% return on investment over 90 days.

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

Kingstone Companies  vs.  Universal Insurance Holdings

Kingstone Companies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kingstone Companies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Kingstone Companies unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent basic indicators, Universal Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kingstone Companies and Universal Insurance

The main advantage of trading using opposite Kingstone Companies and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kingstone Companies 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 Kingstone Companies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.