Correlation Between Universal Entertainment and NORTHEAST UTILITIES
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment and NORTHEAST UTILITIES 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 Universal Entertainment and NORTHEAST UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and NORTHEAST UTILITIES, you can compare the effects of market volatilities on Universal Entertainment and NORTHEAST UTILITIES 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 Universal Entertainment with a short position of NORTHEAST UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and NORTHEAST UTILITIES.
Diversification Opportunities for Universal Entertainment and NORTHEAST UTILITIES
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Universal and NORTHEAST is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and NORTHEAST UTILITIES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NORTHEAST UTILITIES and Universal Entertainment 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 Universal Entertainment are associated (or correlated) with NORTHEAST UTILITIES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NORTHEAST UTILITIES has no effect on the direction of Universal Entertainment i.e., Universal Entertainment and NORTHEAST UTILITIES go up and down completely randomly.
Pair Corralation between Universal Entertainment and NORTHEAST UTILITIES
Assuming the 90 days trading horizon Universal Entertainment is expected to generate 2.33 times more return on investment than NORTHEAST UTILITIES. However, Universal Entertainment is 2.33 times more volatile than NORTHEAST UTILITIES. It trades about 0.27 of its potential returns per unit of risk. NORTHEAST UTILITIES is currently generating about 0.05 per unit of risk. If you would invest 585.00 in Universal Entertainment on October 23, 2024 and sell it today you would earn a total of 80.00 from holding Universal Entertainment or generate 13.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Entertainment vs. NORTHEAST UTILITIES
Performance |
| Timeline |
| Universal Entertainment |
| NORTHEAST UTILITIES |
Universal Entertainment and NORTHEAST UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and NORTHEAST UTILITIES
The main advantage of trading using opposite Universal Entertainment and NORTHEAST UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment position performs unexpectedly, NORTHEAST UTILITIES 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 NORTHEAST UTILITIES will offset losses from the drop in NORTHEAST UTILITIES's long position.| Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc | Universal Entertainment vs. Apple Inc |
| NORTHEAST UTILITIES vs. China Development Bank | NORTHEAST UTILITIES vs. Universal Entertainment | NORTHEAST UTILITIES vs. GigaMedia | NORTHEAST UTILITIES vs. FUYO GENERAL LEASE |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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