Correlation Between Universal Corp and ZENERGY B

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

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

Diversification Opportunities for Universal Corp and ZENERGY B

-0.57

Correlation Coefficient

Universal Corp  ZENERGY B

Excellent diversification

The 3 months correlation between Universal and ZENERGY is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Universal Corp and ZENERGY B AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZENERGY B AB and Universal Corp 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 Corp are associated (or correlated) with ZENERGY B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZENERGY B AB has no effect on the direction of Universal Corp i.e., Universal Corp and ZENERGY B go up and down completely randomly.

Pair Corralation between Universal Corp and ZENERGY B

Assuming the 90 days trading horizon Universal Corp is expected to generate 1.14 times less return on investment than ZENERGY B. But when comparing it to its historical volatility, Universal Corp is 7.11 times less risky than ZENERGY B. It trades about 0.12 of its potential returns per unit of risk. ZENERGY B AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  25.00  in ZENERGY B AB on October 1, 2024 and sell it today you would lose (7.00) from holding ZENERGY B AB or give up 28.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Universal Corp  vs.  ZENERGY B AB

Universal Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Universal Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ZENERGY B AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZENERGY B AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic 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.

Pair Trading with Universal Corp and ZENERGY B

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

The idea behind Universal Corp and ZENERGY B AB 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.