Correlation Between Universal Insurance and Horace Mann

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

Diversification Opportunities for Universal Insurance and Horace Mann

0.75

Correlation Coefficient

Universal Insurance  Horace Mann

Poor diversification

The 3 months correlation between Universal and Horace is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and Horace Mann Educators in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Horace Mann Educators 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 Horace Mann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Horace Mann Educators has no effect on the direction of Universal Insurance i.e., Universal Insurance and Horace Mann go up and down completely randomly.

Pair Corralation between Universal Insurance and Horace Mann

Considering the 90-day investment horizon Universal Insurance Holdings is expected to generate 1.68 times more return on investment than Horace Mann. However, Universal Insurance is 1.68 times more volatile than Horace Mann Educators. It trades about 0.02 of its potential returns per unit of risk. Horace Mann Educators is currently generating about 0.03 per unit of risk. If you would invest  1,753  in Universal Insurance Holdings on November 20, 2024 and sell it today you would earn a total of  289.00  from holding Universal Insurance Holdings or generate 16.49% 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.  Horace Mann Educators

Universal Insurance

Risk-Adjusted Performance

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 latest inconsistent performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Horace Mann Educators

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Horace Mann Educators are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Horace Mann is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Universal Insurance and Horace Mann

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

The idea behind Universal Insurance Holdings and Horace Mann Educators 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.