Correlation Between X FAB and Universal Insurance

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

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

Diversification Opportunities for X FAB and Universal Insurance

-0.35

Correlation Coefficient

X FAB  Universal Insurance

Very good diversification

The 3 months correlation between XFB and Universal is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and X FAB 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 X FAB Silicon Foundries are associated (or correlated) with Universal Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Insurance has no effect on the direction of X FAB i.e., X FAB and Universal Insurance go up and down completely randomly.

Pair Corralation between X FAB and Universal Insurance

Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to generate 1.57 times more return on investment than Universal Insurance. However, X FAB is 1.57 times more volatile than Universal Insurance Holdings. It trades about 0.07 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about -0.2 per unit of risk. If you would invest  501.00  in X FAB Silicon Foundries on October 25, 2024 and sell it today you would earn a total of  15.00  from holding X FAB Silicon Foundries or generate 2.99% return on investment over 90 days.

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

X FAB Silicon Foundries  vs.  Universal Insurance Holdings

X FAB Silicon

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in X FAB Silicon Foundries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, X FAB exhibited solid returns over the last few months and may actually be approaching a breakup point.

Universal Insurance

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with X FAB and Universal Insurance

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

The idea behind X FAB Silicon Foundries and Universal Insurance Holdings 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.