Correlation Between Universal Power and Alliance Global

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

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

Diversification Opportunities for Universal Power and Alliance Global

0.04

Correlation Coefficient

Universal Power  Alliance Global

Significant diversification

The 3 months correlation between Universal and Alliance is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Universal Power Industry and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group and Universal Power 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 Power Industry are associated (or correlated) with Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Universal Power i.e., Universal Power and Alliance Global go up and down completely randomly.

Pair Corralation between Universal Power and Alliance Global

Given the investment horizon of 90 days Universal Power Industry is expected to generate 0.99 times more return on investment than Alliance Global. However, Universal Power Industry is 1.01 times less risky than Alliance Global. It trades about 0.01 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.1 per unit of risk. If you would invest  0.37  in Universal Power Industry on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Universal Power Industry or generate 0.0% return on investment over 90 days.

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

Universal Power Industry  vs.  Alliance Global Group

Universal Power Industry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Power Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Universal Power is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Alliance Global Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Universal Power and Alliance Global

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

The idea behind Universal Power Industry and Alliance Global Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.