Correlation Between UQC and Harmony

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

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

Diversification Opportunities for UQC and Harmony

0.45

Correlation Coefficient

UQC  Harmony

Very weak diversification

The 3 months correlation between UQC and Harmony is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding UQC and Harmony in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony and UQC 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 UQC are associated (or correlated) with Harmony. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony has no effect on the direction of UQC i.e., UQC and Harmony go up and down completely randomly.

Pair Corralation between UQC and Harmony

Assuming the 90 days trading horizon UQC is expected to generate 5.29 times more return on investment than Harmony. However, UQC is 5.29 times more volatile than Harmony. It trades about 0.12 of its potential returns per unit of risk. Harmony is currently generating about 0.27 per unit of risk. If you would invest  440.00  in UQC on September 3, 2024 and sell it today you would earn a total of  326.00  from holding UQC or generate 74.09% return on investment over 90 days.

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

UQC  vs.  Harmony

UQC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UQC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, UQC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Harmony

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harmony are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Harmony exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UQC and Harmony

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

The idea behind UQC and Harmony 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.