Correlation Between Universal Insurance and BTC Digital

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

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

Diversification Opportunities for Universal Insurance and BTC Digital

0.73

Correlation Coefficient

Universal Insurance  BTC Digital

Poor diversification

The 3 months correlation between Universal and BTC is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and BTC Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Digital and Universal 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 Universal Insurance Holdings are associated (or correlated) with BTC Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Digital has no effect on the direction of Universal Insurance i.e., Universal Insurance and BTC Digital go up and down completely randomly.

Pair Corralation between Universal Insurance and BTC Digital

Considering the 90-day investment horizon Universal Insurance Holdings is expected to under-perform the BTC Digital. But the stock apears to be less risky and, when comparing its historical volatility, Universal Insurance Holdings is 26.33 times less risky than BTC Digital. The stock trades about -0.09 of its potential returns per unit of risk. The BTC Digital is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2.80  in BTC Digital on October 7, 2024 and sell it today you would earn a total of  2.20  from holding BTC Digital or generate 78.57% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  BTC Digital

Universal Insurance

Risk-Adjusted Performance

9 of 100

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.

BTC Digital

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, BTC Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Insurance and BTC Digital

The main advantage of trading using opposite Universal Insurance and BTC Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, BTC Digital 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 BTC Digital will offset losses from the drop in BTC Digital's long position.

The idea behind Universal Insurance Holdings and BTC Digital 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.