Correlation Between Middle Island and Universal Entertainment
Can any of the company-specific risk be diversified away by investing in both Middle Island and Universal Entertainment 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 Middle Island and Universal Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middle Island Resources and Universal Entertainment, you can compare the effects of market volatilities on Middle Island and Universal Entertainment 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 Middle Island with a short position of Universal Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middle Island and Universal Entertainment.
Diversification Opportunities for Middle Island and Universal Entertainment
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Middle and Universal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Middle Island Resources and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment and Middle Island 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 Middle Island Resources are associated (or correlated) with Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of Middle Island i.e., Middle Island and Universal Entertainment go up and down completely randomly.
Pair Corralation between Middle Island and Universal Entertainment
Assuming the 90 days horizon Middle Island Resources is expected to generate 18.99 times more return on investment than Universal Entertainment. However, Middle Island is 18.99 times more volatile than Universal Entertainment. It trades about 0.14 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.07 per unit of risk. If you would invest 0.20 in Middle Island Resources on September 14, 2024 and sell it today you would earn a total of 0.25 from holding Middle Island Resources or generate 125.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Middle Island Resources vs. Universal Entertainment
Performance |
| Timeline |
| Middle Island Resources |
| Universal Entertainment |
Middle Island and Universal Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middle Island and Universal Entertainment
The main advantage of trading using opposite Middle Island and Universal Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middle Island position performs unexpectedly, Universal Entertainment 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 Entertainment will offset losses from the drop in Universal Entertainment's long position.| Middle Island vs. Universal Entertainment | Middle Island vs. Ross Stores | Middle Island vs. PLAYTIKA HOLDING DL 01 | Middle Island vs. GigaMedia |
| Universal Entertainment vs. HF FOODS GRP | Universal Entertainment vs. NetSol Technologies | Universal Entertainment vs. Charoen Pokphand Foods | Universal Entertainment vs. SOFI TECHNOLOGIES |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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