Correlation Between Universal Power and Protect Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both Universal Power and Protect Pharmaceutical 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 Protect Pharmaceutical 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 Protect Pharmaceutical, you can compare the effects of market volatilities on Universal Power and Protect Pharmaceutical 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 Protect Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Power and Protect Pharmaceutical.

Diversification Opportunities for Universal Power and Protect Pharmaceutical

-0.18

Correlation Coefficient

Universal Power  Protect Pharmaceutical

Good diversification

The 3 months correlation between Universal and Protect is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Universal Power Industry and Protect Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protect Pharmaceutical 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 Protect Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protect Pharmaceutical has no effect on the direction of Universal Power i.e., Universal Power and Protect Pharmaceutical go up and down completely randomly.

Pair Corralation between Universal Power and Protect Pharmaceutical

Given the investment horizon of 90 days Universal Power Industry is expected to generate 1.78 times more return on investment than Protect Pharmaceutical. However, Universal Power is 1.78 times more volatile than Protect Pharmaceutical. It trades about 0.13 of its potential returns per unit of risk. Protect Pharmaceutical is currently generating about -0.09 per unit of risk. If you would invest  0.37  in Universal Power Industry on September 13, 2024 and sell it today you would earn a total of  0.63  from holding Universal Power Industry or generate 170.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Universal Power Industry  vs.  Protect Pharmaceutical

Universal Power Industry

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Power Industry are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Universal Power displayed solid returns over the last few months and may actually be approaching a breakup point.

Protect Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Protect Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Universal Power and Protect Pharmaceutical

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

The idea behind Universal Power Industry and Protect Pharmaceutical 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.