Correlation Between Universal Microelectronics and Kaulin Mfg

Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Kaulin Mfg 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 Microelectronics and Kaulin Mfg into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Universal Microelectronics Co and Kaulin Mfg, you can compare the effects of market volatilities on Universal Microelectronics and Kaulin Mfg 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 Microelectronics with a short position of Kaulin Mfg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Kaulin Mfg.

Diversification Opportunities for Universal Microelectronics and Kaulin Mfg

0.71

Correlation Coefficient

Universal Microelectronics  Kaulin Mfg

Poor diversification

The 3 months correlation between Universal and Kaulin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Kaulin Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaulin Mfg and Universal Microelectronics 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 Microelectronics Co are associated (or correlated) with Kaulin Mfg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaulin Mfg has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Kaulin Mfg go up and down completely randomly.

Pair Corralation between Universal Microelectronics and Kaulin Mfg

Assuming the 90 days trading horizon Universal Microelectronics is expected to generate 1.81 times less return on investment than Kaulin Mfg. In addition to that, Universal Microelectronics is 1.33 times more volatile than Kaulin Mfg. It trades about 0.02 of its total potential returns per unit of risk. Kaulin Mfg is currently generating about 0.04 per unit of volatility. If you would invest  1,310  in Kaulin Mfg on September 10, 2024 and sell it today you would earn a total of  245.00  from holding Kaulin Mfg or generate 18.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Universal Microelectronics Co  vs.  Kaulin Mfg

Universal Microelectronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Kaulin Mfg

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kaulin Mfg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kaulin Mfg showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Microelectronics and Kaulin Mfg

The main advantage of trading using opposite Universal Microelectronics and Kaulin Mfg positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Microelectronics position performs unexpectedly, Kaulin Mfg 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 Kaulin Mfg will offset losses from the drop in Kaulin Mfg's long position.

The idea behind Universal Microelectronics Co and Kaulin Mfg 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.