Correlation Between Universal Microelectronics and Celxpert Energy
Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Celxpert Energy 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 Microelectronics and Celxpert Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Microelectronics Co and Celxpert Energy, you can compare the effects of market volatilities on Universal Microelectronics and Celxpert Energy 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 Microelectronics with a short position of Celxpert Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Celxpert Energy.
Diversification Opportunities for Universal Microelectronics and Celxpert Energy
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Universal and Celxpert is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Celxpert Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celxpert Energy and Universal Microelectronics 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 Microelectronics Co are associated (or correlated) with Celxpert Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celxpert Energy has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Celxpert Energy go up and down completely randomly.
Pair Corralation between Universal Microelectronics and Celxpert Energy
Assuming the 90 days trading horizon Universal Microelectronics Co is expected to under-perform the Celxpert Energy. But the stock apears to be less risky and, when comparing its historical volatility, Universal Microelectronics Co is 1.46 times less risky than Celxpert Energy. The stock trades about -0.23 of its potential returns per unit of risk. The Celxpert Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,435 in Celxpert Energy on October 25, 2024 and sell it today you would earn a total of 215.00 from holding Celxpert Energy or generate 6.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Microelectronics Co vs. Celxpert Energy
Performance |
| Timeline |
| Universal Microelectronics |
| Celxpert Energy |
Universal Microelectronics and Celxpert Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Microelectronics and Celxpert Energy
The main advantage of trading using opposite Universal Microelectronics and Celxpert Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Microelectronics position performs unexpectedly, Celxpert Energy 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 Celxpert Energy will offset losses from the drop in Celxpert Energy's long position.The idea behind Universal Microelectronics Co and Celxpert Energy 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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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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