Correlation Between Vector and Universal
Can any of the company-specific risk be diversified away by investing in both Vector and Universal 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 Vector and Universal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vector Group and Universal, you can compare the effects of market volatilities on Vector and Universal 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 Vector with a short position of Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vector and Universal.
Diversification Opportunities for Vector and Universal
Significant diversification
The 3 months correlation between Vector and Universal is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Vector Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Vector 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 Vector Group are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Vector i.e., Vector and Universal go up and down completely randomly.
Pair Corralation between Vector and Universal
Considering the 90-day investment horizon Vector Group is expected to under-perform the Universal. But the stock apears to be less risky and, when comparing its historical volatility, Vector Group is 6.98 times less risky than Universal. The stock trades about -0.03 of its potential returns per unit of risk. The Universal is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,277 in Universal on August 31, 2024 and sell it today you would earn a total of 387.00 from holding Universal or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 41.27% |
| Values | Daily Returns |
Vector Group vs. Universal
Performance |
| Timeline |
| Vector Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Universal |
Vector and Universal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vector and Universal
The main advantage of trading using opposite Vector and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vector position performs unexpectedly, Universal 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 will offset losses from the drop in Universal's long position.| Vector vs. Universal | Vector vs. Imperial Brands PLC | Vector vs. Japan Tobacco ADR | Vector vs. Philip Morris International |
| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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