Correlation Between Universal Logistics and EVI Industries

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

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

Diversification Opportunities for Universal Logistics and EVI Industries

0.42

Correlation Coefficient

Universal Logistics  EVI Industries

Very weak diversification

The 3 months correlation between Universal and EVI is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Universal Logistics Holdings and EVI Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVI Industries and Universal Logistics 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 Logistics Holdings are associated (or correlated) with EVI Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVI Industries has no effect on the direction of Universal Logistics i.e., Universal Logistics and EVI Industries go up and down completely randomly.

Pair Corralation between Universal Logistics and EVI Industries

Considering the 90-day investment horizon Universal Logistics Holdings is expected to generate 0.7 times more return on investment than EVI Industries. However, Universal Logistics Holdings is 1.44 times less risky than EVI Industries. It trades about 0.07 of its potential returns per unit of risk. EVI Industries is currently generating about 0.03 per unit of risk. If you would invest  4,044  in Universal Logistics Holdings on September 5, 2024 and sell it today you would earn a total of  936.00  from holding Universal Logistics Holdings or generate 23.15% return on investment over 90 days.

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

Universal Logistics Holdings  vs.  EVI Industries

Universal Logistics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Logistics Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent essential indicators, Universal Logistics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

EVI Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVI Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, EVI Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Logistics and EVI Industries

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

The idea behind Universal Logistics Holdings and EVI Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.