Correlation Between Trematon Capital and Universal Partners

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

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

Diversification Opportunities for Trematon Capital and Universal Partners

0.38

Correlation Coefficient

Trematon Capital  Universal Partners

Weak diversification

The 3 months correlation between Trematon and Universal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Trematon Capital Investments and Universal Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Partners and Trematon Capital 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 Trematon Capital Investments are associated (or correlated) with Universal Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Partners has no effect on the direction of Trematon Capital i.e., Trematon Capital and Universal Partners go up and down completely randomly.

Pair Corralation between Trematon Capital and Universal Partners

Assuming the 90 days trading horizon Trematon Capital Investments is expected to under-perform the Universal Partners. In addition to that, Trematon Capital is 2.41 times more volatile than Universal Partners. It trades about -0.08 of its total potential returns per unit of risk. Universal Partners is currently generating about -0.04 per unit of volatility. If you would invest  200,000  in Universal Partners on September 13, 2024 and sell it today you would lose (10,000) from holding Universal Partners or give up 5.0% of portfolio value over 90 days.

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

Trematon Capital Investments  vs.  Universal Partners

Trematon Capital Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trematon Capital Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Universal Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Universal Partners is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Trematon Capital and Universal Partners

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

The idea behind Trematon Capital Investments and Universal Partners 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.