Correlation Between Uni President and President Chain
Can any of the company-specific risk be diversified away by investing in both Uni President and President Chain 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 Uni President and President Chain into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uni President Enterprises Corp and President Chain Store, you can compare the effects of market volatilities on Uni President and President Chain 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 Uni President with a short position of President Chain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uni President and President Chain.
Diversification Opportunities for Uni President and President Chain
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Uni and President is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Uni President Enterprises Corp and President Chain Store in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on President Chain Store and Uni President 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 Uni President Enterprises Corp are associated (or correlated) with President Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of President Chain Store has no effect on the direction of Uni President i.e., Uni President and President Chain go up and down completely randomly.
Pair Corralation between Uni President and President Chain
Assuming the 90 days trading horizon Uni President Enterprises Corp is expected to under-perform the President Chain. In addition to that, Uni President is 1.92 times more volatile than President Chain Store. It trades about -0.11 of its total potential returns per unit of risk. President Chain Store is currently generating about -0.14 per unit of volatility. If you would invest 26,300 in President Chain Store on November 3, 2024 and sell it today you would lose (300.00) from holding President Chain Store or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Uni President Enterprises Corp vs. President Chain Store
Performance |
| Timeline |
| Uni President Enterp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| President Chain Store |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Uni President and President Chain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Uni President and President Chain
The main advantage of trading using opposite Uni President and President Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uni President position performs unexpectedly, President Chain 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 President Chain will offset losses from the drop in President Chain's long position.The idea behind Uni President Enterprises Corp and President Chain Store 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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