Correlation Between Universal and AETNA

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

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

Diversification Opportunities for Universal and AETNA

-0.45

Correlation Coefficient

Universal  AETNA

Very good diversification

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

Pair Corralation between Universal and AETNA

Considering the 90-day investment horizon Universal is expected to generate 0.88 times more return on investment than AETNA. However, Universal is 1.13 times less risky than AETNA. It trades about 0.11 of its potential returns per unit of risk. AETNA INC NEW is currently generating about -0.15 per unit of risk. If you would invest  5,162  in Universal on September 13, 2024 and sell it today you would earn a total of  467.00  from holding Universal or generate 9.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Universal  vs.  AETNA INC NEW

Universal

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AETNA INC NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for AETNA INC NEW investors.

Pair Trading with Universal and AETNA

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

The idea behind Universal and AETNA INC NEW 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.