Correlation Between STERLING FINANCIAL and UNIVERSAL INSURANCE

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

By analyzing existing cross correlation between STERLING FINANCIAL HOLDINGS and UNIVERSAL INSURANCE PANY, you can compare the effects of market volatilities on STERLING FINANCIAL 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 STERLING FINANCIAL with a short position of UNIVERSAL INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of STERLING FINANCIAL and UNIVERSAL INSURANCE.

Diversification Opportunities for STERLING FINANCIAL and UNIVERSAL INSURANCE

0.93

Correlation Coefficient

STERLING FINANCIAL  UNIVERSAL INSURANCE

Almost no diversification

The 3 months correlation between STERLING and UNIVERSAL is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding STERLING FINANCIAL HOLDINGS and UNIVERSAL INSURANCE PANY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL INSURANCE PANY and STERLING FINANCIAL 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 STERLING FINANCIAL HOLDINGS 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 PANY has no effect on the direction of STERLING FINANCIAL i.e., STERLING FINANCIAL and UNIVERSAL INSURANCE go up and down completely randomly.

Pair Corralation between STERLING FINANCIAL and UNIVERSAL INSURANCE

Assuming the 90 days trading horizon STERLING FINANCIAL is expected to generate 3.6 times less return on investment than UNIVERSAL INSURANCE. But when comparing it to its historical volatility, STERLING FINANCIAL HOLDINGS is 1.71 times less risky than UNIVERSAL INSURANCE. It trades about 0.1 of its potential returns per unit of risk. UNIVERSAL INSURANCE PANY is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  34.00  in UNIVERSAL INSURANCE PANY on October 21, 2024 and sell it today you would earn a total of  29.00  from holding UNIVERSAL INSURANCE PANY or generate 85.29% return on investment over 90 days.

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

STERLING FINANCIAL HOLDINGS  vs.  UNIVERSAL INSURANCE PANY

STERLING FINANCIAL

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in STERLING FINANCIAL HOLDINGS are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, STERLING FINANCIAL displayed solid returns over the last few months and may actually be approaching a breakup point.

UNIVERSAL INSURANCE PANY

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UNIVERSAL INSURANCE PANY are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UNIVERSAL INSURANCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with STERLING FINANCIAL and UNIVERSAL INSURANCE

The main advantage of trading using opposite STERLING FINANCIAL and UNIVERSAL INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STERLING FINANCIAL 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 STERLING FINANCIAL HOLDINGS and UNIVERSAL INSURANCE PANY 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 Transaction History module to view history of all your transactions and understand their impact on performance.