Correlation Between Universal Corp and Hays Plc

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

By analyzing existing cross correlation between Universal Corp and Hays plc, you can compare the effects of market volatilities on Universal Corp and Hays Plc 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 Hays Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Corp and Hays Plc.

Diversification Opportunities for Universal Corp and Hays Plc

-0.58

Correlation Coefficient

Universal Corp  Hays Plc

Excellent diversification

The 3 months correlation between Universal and Hays is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Universal Corp and Hays plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hays plc 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 Hays Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hays plc has no effect on the direction of Universal Corp i.e., Universal Corp and Hays Plc go up and down completely randomly.

Pair Corralation between Universal Corp and Hays Plc

Assuming the 90 days trading horizon Universal Corp is expected to under-perform the Hays Plc. But the stock apears to be less risky and, when comparing its historical volatility, Universal Corp is 2.82 times less risky than Hays Plc. The stock trades about -0.22 of its potential returns per unit of risk. The Hays plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Hays plc on September 23, 2024 and sell it today you would earn a total of  5.00  from holding Hays plc or generate 5.56% return on investment over 90 days.

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

Universal Corp  vs.  Hays plc

Universal Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Corp are ranked lower than 10 (%) 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.

Hays plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hays plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Universal Corp and Hays Plc

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

The idea behind Universal Corp and Hays plc 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.