Correlation Between United Guardian and Big Tree

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

By analyzing existing cross correlation between United Guardian and Big Tree Cloud, you can compare the effects of market volatilities on United Guardian and Big Tree 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 United Guardian with a short position of Big Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and Big Tree.

Diversification Opportunities for United Guardian and Big Tree

0.63

Correlation Coefficient

United Guardian  Big Tree

Poor diversification

The 3 months correlation between United and Big is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Guardian and Big Tree Cloud in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Tree Cloud and United Guardian 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 United Guardian are associated (or correlated) with Big Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Tree Cloud has no effect on the direction of United Guardian i.e., United Guardian and Big Tree go up and down completely randomly.

Pair Corralation between United Guardian and Big Tree

Allowing for the 90-day total investment horizon United Guardian is expected to under-perform the Big Tree. But the stock apears to be less risky and, when comparing its historical volatility, United Guardian is 4.04 times less risky than Big Tree. The stock trades about -0.16 of its potential returns per unit of risk. The Big Tree Cloud is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Big Tree Cloud on September 15, 2024 and sell it today you would lose (151.00) from holding Big Tree Cloud or give up 29.67% of portfolio value over 90 days.

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

United Guardian  vs.  Big Tree Cloud

United Guardian

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Guardian has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Big Tree Cloud

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Big Tree Cloud are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Big Tree showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Guardian and Big Tree

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

The idea behind United Guardian and Big Tree Cloud 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..