Correlation Between UCB SA and Fountain

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

By analyzing existing cross correlation between UCB SA and Fountain, you can compare the effects of market volatilities on UCB SA and Fountain 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 Fountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of UCB SA and Fountain.

Diversification Opportunities for UCB SA and Fountain

-0.57

Correlation Coefficient

UCB SA  Fountain

Excellent diversification

The 3 months correlation between UCB and Fountain is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and Fountain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fountain 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 Fountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fountain has no effect on the direction of UCB SA i.e., UCB SA and Fountain go up and down completely randomly.

Pair Corralation between UCB SA and Fountain

Assuming the 90 days trading horizon UCB SA is expected to generate 0.42 times more return on investment than Fountain. However, UCB SA is 2.36 times less risky than Fountain. It trades about 0.13 of its potential returns per unit of risk. Fountain is currently generating about -0.07 per unit of risk. If you would invest  16,340  in UCB SA on September 22, 2024 and sell it today you would earn a total of  2,320  from holding UCB SA or generate 14.2% return on investment over 90 days.

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

UCB SA  vs.  Fountain

UCB SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, UCB SA reported solid returns over the last few months and may actually be approaching a breakup point.

Fountain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fountain has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with UCB SA and Fountain

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

The idea behind UCB SA and Fountain 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.