Correlation Between Leatec Fine and Uniform Industrial
Can any of the company-specific risk be diversified away by investing in both Leatec Fine and Uniform Industrial 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 Leatec Fine and Uniform Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Leatec Fine Ceramics and Uniform Industrial Corp, you can compare the effects of market volatilities on Leatec Fine and Uniform Industrial 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 Leatec Fine with a short position of Uniform Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Leatec Fine and Uniform Industrial.
Diversification Opportunities for Leatec Fine and Uniform Industrial
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Leatec and Uniform is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Leatec Fine Ceramics and Uniform Industrial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniform Industrial Corp and Leatec Fine 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 Leatec Fine Ceramics are associated (or correlated) with Uniform Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniform Industrial Corp has no effect on the direction of Leatec Fine i.e., Leatec Fine and Uniform Industrial go up and down completely randomly.
Pair Corralation between Leatec Fine and Uniform Industrial
Assuming the 90 days trading horizon Leatec Fine Ceramics is expected to generate 1.57 times more return on investment than Uniform Industrial. However, Leatec Fine is 1.57 times more volatile than Uniform Industrial Corp. It trades about -0.04 of its potential returns per unit of risk. Uniform Industrial Corp is currently generating about -0.25 per unit of risk. If you would invest 2,790 in Leatec Fine Ceramics on November 6, 2024 and sell it today you would lose (240.00) from holding Leatec Fine Ceramics or give up 8.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Leatec Fine Ceramics vs. Uniform Industrial Corp
Performance |
| Timeline |
| Leatec Fine Ceramics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Uniform Industrial Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Leatec Fine and Uniform Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Leatec Fine and Uniform Industrial
The main advantage of trading using opposite Leatec Fine and Uniform Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leatec Fine position performs unexpectedly, Uniform Industrial 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 Uniform Industrial will offset losses from the drop in Uniform Industrial's long position.The idea behind Leatec Fine Ceramics and Uniform Industrial Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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