Correlation Between CSL and UCB SA
Can any of the company-specific risk be diversified away by investing in both CSL and UCB SA 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 CSL and UCB SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and UCB SA, you can compare the effects of market volatilities on CSL and UCB SA 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 CSL with a short position of UCB SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and UCB SA.
Diversification Opportunities for CSL and UCB SA
Very good diversification
The 3 months correlation between CSL and UCB is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CSL and UCB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UCB SA and CSL 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 CSL are associated (or correlated) with UCB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UCB SA has no effect on the direction of CSL i.e., CSL and UCB SA go up and down completely randomly.
Pair Corralation between CSL and UCB SA
Assuming the 90 days horizon CSL is expected to under-perform the UCB SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 2.06 times less risky than UCB SA. The pink sheet trades about -0.19 of its potential returns per unit of risk. The UCB SA is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 18,400 in UCB SA on August 28, 2024 and sell it today you would lose (1,000.00) from holding UCB SA or give up 5.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. UCB SA
Performance |
| Timeline |
| CSL |
| UCB SA |
CSL and UCB SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and UCB SA
The main advantage of trading using opposite CSL and UCB SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, UCB SA 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 UCB SA will offset losses from the drop in UCB SA's long position.The idea behind CSL and UCB SA 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.| UCB SA vs. Bolt Biotherapeutics | UCB SA vs. Cara Therapeutic | UCB SA vs. Arcus Biosciences | UCB SA vs. Senti Biosciences |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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