Correlation Between Universal Insurance and Ghandhara Automobile

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

By analyzing existing cross correlation between Universal Insurance and Ghandhara Automobile, you can compare the effects of market volatilities on Universal Insurance and Ghandhara Automobile 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 Ghandhara Automobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Insurance and Ghandhara Automobile.

Diversification Opportunities for Universal Insurance and Ghandhara Automobile

0.01

Correlation Coefficient

Universal Insurance  Ghandhara Automobile

Significant diversification

The 3 months correlation between Universal and Ghandhara is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Universal Insurance and Ghandhara Automobile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ghandhara Automobile 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 are associated (or correlated) with Ghandhara Automobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ghandhara Automobile has no effect on the direction of Universal Insurance i.e., Universal Insurance and Ghandhara Automobile go up and down completely randomly.

Pair Corralation between Universal Insurance and Ghandhara Automobile

Assuming the 90 days trading horizon Universal Insurance is expected to under-perform the Ghandhara Automobile. In addition to that, Universal Insurance is 1.75 times more volatile than Ghandhara Automobile. It trades about 0.0 of its total potential returns per unit of risk. Ghandhara Automobile is currently generating about 0.25 per unit of volatility. If you would invest  28,585  in Ghandhara Automobile on December 25, 2024 and sell it today you would earn a total of  17,959  from holding Ghandhara Automobile or generate 62.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Universal Insurance  vs.  Ghandhara Automobile

Universal Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Universal Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ghandhara Automobile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ghandhara Automobile are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghandhara Automobile reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Insurance and Ghandhara Automobile

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

The idea behind Universal Insurance and Ghandhara Automobile 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 Stocks Directory module to find actively traded stocks across global markets.