Correlation Between Universal Insurance and Corning Incorporated

Can any of the company-specific risk be diversified away by investing in both Universal Insurance and Corning Incorporated 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 Corning Incorporated 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 Corning Incorporated, you can compare the effects of market volatilities on Universal Insurance and Corning Incorporated 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 Corning Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Corning Incorporated.

Diversification Opportunities for Universal Insurance and Corning Incorporated

0.03

Correlation Coefficient

Universal Insurance  Corning Incorporated

Significant diversification

The 3 months correlation between Universal and Corning is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of Universal Insurance i.e., Universal Insurance and Corning Incorporated go up and down completely randomly.

Pair Corralation between Universal Insurance and Corning Incorporated

Considering the 90-day investment horizon Universal Insurance Holdings is expected to under-perform the Corning Incorporated. In addition to that, Universal Insurance is 1.04 times more volatile than Corning Incorporated. It trades about -0.01 of its total potential returns per unit of risk. Corning Incorporated is currently generating about 0.17 per unit of volatility. If you would invest  4,656  in Corning Incorporated on October 26, 2024 and sell it today you would earn a total of  767.00  from holding Corning Incorporated or generate 16.47% return on investment over 90 days.

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

Universal Insurance Holdings  vs.  Corning Incorporated

Universal Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Insurance Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Corning Incorporated

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Corning Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Insurance and Corning Incorporated

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

The idea behind Universal Insurance Holdings and Corning Incorporated 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.