Correlation Between Celestica and Universal Security

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

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

Diversification Opportunities for Celestica and Universal Security

0.92

Correlation Coefficient

Celestica  Universal Security

Almost no diversification

The 3 months correlation between Celestica and Universal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Celestica and Universal Security Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Security and Celestica 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 Celestica are associated (or correlated) with Universal Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Security has no effect on the direction of Celestica i.e., Celestica and Universal Security go up and down completely randomly.

Pair Corralation between Celestica and Universal Security

Considering the 90-day investment horizon Celestica is expected to generate 0.49 times more return on investment than Universal Security. However, Celestica is 2.03 times less risky than Universal Security. It trades about 0.32 of its potential returns per unit of risk. Universal Security Instruments is currently generating about 0.16 per unit of risk. If you would invest  4,587  in Celestica on September 13, 2024 and sell it today you would earn a total of  4,514  from holding Celestica or generate 98.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Celestica  vs.  Universal Security Instruments

Celestica

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Celestica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Security

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Celestica and Universal Security

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

The idea behind Celestica and Universal Security Instruments 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.