Correlation Between SLR Investment and Universal Insurance

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

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

Diversification Opportunities for SLR Investment and Universal Insurance

0.64

Correlation Coefficient

SLR Investment  Universal Insurance

Poor diversification

The 3 months correlation between SLR and Universal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and SLR Investment 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 SLR Investment Corp 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 SLR Investment i.e., SLR Investment and Universal Insurance go up and down completely randomly.

Pair Corralation between SLR Investment and Universal Insurance

Given the investment horizon of 90 days SLR Investment is expected to generate 2.36 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, SLR Investment Corp is 2.87 times less risky than Universal Insurance. It trades about 0.06 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,141  in Universal Insurance Holdings on October 11, 2024 and sell it today you would earn a total of  826.00  from holding Universal Insurance Holdings or generate 72.39% return on investment over 90 days.

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

SLR Investment Corp  vs.  Universal Insurance Holdings

SLR Investment Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, SLR Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 sound basic indicators, Universal Insurance is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SLR Investment and Universal Insurance

The main advantage of trading using opposite SLR Investment and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLR Investment 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 SLR Investment Corp 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.