Correlation Between Hasbro and Universal Electronics
Can any of the company-specific risk be diversified away by investing in both Hasbro and Universal Electronics 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 Hasbro and Universal Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hasbro Inc and Universal Electronics, you can compare the effects of market volatilities on Hasbro and Universal Electronics 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 Hasbro with a short position of Universal Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hasbro and Universal Electronics.
Diversification Opportunities for Hasbro and Universal Electronics
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Hasbro and Universal is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hasbro Inc and Universal Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Electronics and Hasbro 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 Hasbro Inc are associated (or correlated) with Universal Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Electronics has no effect on the direction of Hasbro i.e., Hasbro and Universal Electronics go up and down completely randomly.
Pair Corralation between Hasbro and Universal Electronics
Considering the 90-day investment horizon Hasbro is expected to generate 3.03 times less return on investment than Universal Electronics. But when comparing it to its historical volatility, Hasbro Inc is 1.92 times less risky than Universal Electronics. It trades about 0.03 of its potential returns per unit of risk. Universal Electronics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Universal Electronics on August 27, 2024 and sell it today you would earn a total of 308.00 from holding Universal Electronics or generate 37.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hasbro Inc vs. Universal Electronics
Performance |
| Timeline |
| Hasbro Inc |
| Universal Electronics |
Hasbro and Universal Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hasbro and Universal Electronics
The main advantage of trading using opposite Hasbro and Universal Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hasbro position performs unexpectedly, Universal Electronics 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 Universal Electronics will offset losses from the drop in Universal Electronics' long position.The idea behind Hasbro Inc and Universal Electronics 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.| Universal Electronics vs. LG Display Co | Universal Electronics vs. Vizio Holding Corp | Universal Electronics vs. Zepp Health Corp | Universal Electronics vs. Sonos Inc |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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