Correlation Between OTP Bank and Universal Insurance

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

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

Diversification Opportunities for OTP Bank and Universal Insurance

-0.1

Correlation Coefficient

OTP Bank  Universal Insurance

Good diversification

The 3 months correlation between OTP and Universal is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding OTP Bank Nyrt and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and OTP Bank 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 OTP Bank Nyrt 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 OTP Bank i.e., OTP Bank and Universal Insurance go up and down completely randomly.

Pair Corralation between OTP Bank and Universal Insurance

Assuming the 90 days horizon OTP Bank Nyrt is expected to generate 1.15 times more return on investment than Universal Insurance. However, OTP Bank is 1.15 times more volatile than Universal Insurance Holdings. It trades about 0.19 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.06 per unit of risk. If you would invest  4,669  in OTP Bank Nyrt on October 26, 2024 and sell it today you would earn a total of  1,155  from holding OTP Bank Nyrt or generate 24.74% return on investment over 90 days.

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

OTP Bank Nyrt  vs.  Universal Insurance Holdings

OTP Bank Nyrt

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OTP Bank Nyrt are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OTP Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 4 (%) 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 February 2025.

Pair Trading with OTP Bank and Universal Insurance

The main advantage of trading using opposite OTP Bank and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OTP Bank 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 OTP Bank Nyrt 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 Global Correlations module to find global opportunities by holding instruments from different markets.