Correlation Between Selective Insurance and Universal Insurance

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

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

Diversification Opportunities for Selective Insurance and Universal Insurance

-0.01

Correlation Coefficient

Selective Insurance  Universal Insurance

Good diversification

The 3 months correlation between Selective and Universal is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Selective Insurance 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 Selective Insurance Group 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 Selective Insurance i.e., Selective Insurance and Universal Insurance go up and down completely randomly.

Pair Corralation between Selective Insurance and Universal Insurance

Given the investment horizon of 90 days Selective Insurance is expected to generate 75.77 times less return on investment than Universal Insurance. In addition to that, Selective Insurance is 1.12 times more volatile than Universal Insurance Holdings. It trades about 0.0 of its total potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.12 per unit of volatility. If you would invest  2,041  in Universal Insurance Holdings on December 30, 2024 and sell it today you would earn a total of  293.00  from holding Universal Insurance Holdings or generate 14.36% return on investment over 90 days.

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

Selective Insurance Group  vs.  Universal Insurance Holdings

Selective Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Selective Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Selective Insurance is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Universal Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 9 (%) 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 Selective Insurance and Universal Insurance

The main advantage of trading using opposite Selective Insurance and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance 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 Selective Insurance Group 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..