Correlation Between Hollywood Bowl and Universal Insurance
Can any of the company-specific risk be diversified away by investing in both Hollywood Bowl 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 Hollywood Bowl and Universal Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hollywood Bowl Group and Universal Insurance Holdings, you can compare the effects of market volatilities on Hollywood Bowl 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 Hollywood Bowl with a short position of Universal Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and Universal Insurance.
Diversification Opportunities for Hollywood Bowl and Universal Insurance
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hollywood and Universal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Universal Insurance Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Insurance and Hollywood Bowl 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 Hollywood Bowl Group 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 Hollywood Bowl i.e., Hollywood Bowl and Universal Insurance go up and down completely randomly.
Pair Corralation between Hollywood Bowl and Universal Insurance
Assuming the 90 days horizon Hollywood Bowl is expected to generate 3.1 times less return on investment than Universal Insurance. But when comparing it to its historical volatility, Hollywood Bowl Group is 2.05 times less risky than Universal Insurance. It trades about 0.07 of its potential returns per unit of risk. Universal Insurance Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,572 in Universal Insurance Holdings on February 20, 2024 and sell it today you would earn a total of 308.00 from holding Universal Insurance Holdings or generate 19.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Hollywood Bowl Group vs. Universal Insurance Holdings
Performance |
Timeline |
Hollywood Bowl Group |
Universal Insurance |
Hollywood Bowl and Universal Insurance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hollywood Bowl and Universal Insurance
The main advantage of trading using opposite Hollywood Bowl and Universal Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hollywood Bowl 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 Hollywood Bowl Group 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.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 Transaction History module to view history of all your transactions and understand their impact on performance.
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