Correlation Between Uniform Industrial and Leatec Fine
Can any of the company-specific risk be diversified away by investing in both Uniform Industrial and Leatec Fine 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 Uniform Industrial and Leatec Fine into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uniform Industrial Corp and Leatec Fine Ceramics, you can compare the effects of market volatilities on Uniform Industrial and Leatec Fine 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 Uniform Industrial with a short position of Leatec Fine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uniform Industrial and Leatec Fine.
Diversification Opportunities for Uniform Industrial and Leatec Fine
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Uniform and Leatec is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Uniform Industrial Corp and Leatec Fine Ceramics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leatec Fine Ceramics and Uniform Industrial 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 Uniform Industrial Corp are associated (or correlated) with Leatec Fine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leatec Fine Ceramics has no effect on the direction of Uniform Industrial i.e., Uniform Industrial and Leatec Fine go up and down completely randomly.
Pair Corralation between Uniform Industrial and Leatec Fine
Assuming the 90 days trading horizon Uniform Industrial Corp is expected to under-perform the Leatec Fine. In addition to that, Uniform Industrial is 1.02 times more volatile than Leatec Fine Ceramics. It trades about -0.57 of its total potential returns per unit of risk. Leatec Fine Ceramics is currently generating about -0.32 per unit of volatility. If you would invest 2,770 in Leatec Fine Ceramics on November 6, 2024 and sell it today you would lose (220.00) from holding Leatec Fine Ceramics or give up 7.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Uniform Industrial Corp vs. Leatec Fine Ceramics
Performance |
| Timeline |
| Uniform Industrial Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Leatec Fine Ceramics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Uniform Industrial and Leatec Fine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Uniform Industrial and Leatec Fine
The main advantage of trading using opposite Uniform Industrial and Leatec Fine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uniform Industrial position performs unexpectedly, Leatec Fine 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 Leatec Fine will offset losses from the drop in Leatec Fine's long position.The idea behind Uniform Industrial Corp and Leatec Fine Ceramics 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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