Correlation Between UCB SA and Argen X
Can any of the company-specific risk be diversified away by investing in both UCB SA and Argen X 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 UCB SA and Argen X into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UCB SA and Argen X, you can compare the effects of market volatilities on UCB SA and Argen X 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 UCB SA with a short position of Argen X. Check out your portfolio center. Please also check ongoing floating volatility patterns of UCB SA and Argen X.
Diversification Opportunities for UCB SA and Argen X
Poor diversification
The 3 months correlation between UCB and Argen is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and Argen X in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argen X and UCB SA 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 UCB SA are associated (or correlated) with Argen X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argen X has no effect on the direction of UCB SA i.e., UCB SA and Argen X go up and down completely randomly.
Pair Corralation between UCB SA and Argen X
Assuming the 90 days trading horizon UCB SA is expected to generate 30.07 times less return on investment than Argen X. In addition to that, UCB SA is 1.09 times more volatile than Argen X. It trades about 0.0 of its total potential returns per unit of risk. Argen X is currently generating about 0.1 per unit of volatility. If you would invest 58,720 in Argen X on October 26, 2024 and sell it today you would earn a total of 3,140 from holding Argen X or generate 5.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UCB SA vs. Argen X
Performance |
| Timeline |
| UCB SA |
| Argen X |
UCB SA and Argen X Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UCB SA and Argen X
The main advantage of trading using opposite UCB SA and Argen X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UCB SA position performs unexpectedly, Argen X 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 Argen X will offset losses from the drop in Argen X's long position.The idea behind UCB SA and Argen X 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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