Correlation Between Universal Insurance and KINDER

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

Diversification Opportunities for Universal Insurance and KINDER

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Universal and KINDER is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance Holdings and KINDER MORGAN FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN FIN 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN FIN has no effect on the direction of Universal Insurance i.e., Universal Insurance and KINDER go up and down completely randomly.

Pair Corralation between Universal Insurance and KINDER

Considering the 90-day investment horizon Universal Insurance Holdings is expected to generate 0.77 times more return on investment than KINDER. However, Universal Insurance Holdings is 1.3 times less risky than KINDER. It trades about 0.05 of its potential returns per unit of risk. KINDER MORGAN FIN is currently generating about -0.08 per unit of risk. If you would invest  1,883  in Universal Insurance Holdings on October 10, 2024 and sell it today you would earn a total of  95.00  from holding Universal Insurance Holdings or generate 5.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy24.19%
ValuesDaily Returns

Universal Insurance Holdings  vs.  KINDER MORGAN FIN

 Performance 
       Timeline  
Universal Insurance 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Insurance Holdings are ranked lower than 4 (%) 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.
KINDER MORGAN FIN 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days KINDER MORGAN FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN FIN investors.

Universal Insurance and KINDER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Insurance and KINDER

The main advantage of trading using opposite Universal Insurance and KINDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Insurance position performs unexpectedly, KINDER 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 KINDER will offset losses from the drop in KINDER's long position.
The idea behind Universal Insurance Holdings and KINDER MORGAN FIN 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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