Correlation Between UJU Electronics and Wave Electronics

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

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

Diversification Opportunities for UJU Electronics and Wave Electronics

0.9

Correlation Coefficient

UJU Electronics  Wave Electronics

Almost no diversification

The 3 months correlation between UJU and Wave is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding UJU Electronics Co and Wave Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Electronics and UJU Electronics 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 UJU Electronics Co are associated (or correlated) with Wave Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Electronics has no effect on the direction of UJU Electronics i.e., UJU Electronics and Wave Electronics go up and down completely randomly.

Pair Corralation between UJU Electronics and Wave Electronics

Assuming the 90 days trading horizon UJU Electronics Co is expected to generate 1.12 times more return on investment than Wave Electronics. However, UJU Electronics is 1.12 times more volatile than Wave Electronics Co. It trades about -0.01 of its potential returns per unit of risk. Wave Electronics Co is currently generating about -0.03 per unit of risk. If you would invest  1,390,000  in UJU Electronics Co on September 24, 2024 and sell it today you would lose (20,000) from holding UJU Electronics Co or give up 1.44% of portfolio value over 90 days.

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

UJU Electronics Co  vs.  Wave Electronics Co

UJU Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UJU Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Wave Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wave Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock'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 the company investors.

Pair Trading with UJU Electronics and Wave Electronics

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

The idea behind UJU Electronics Co and Wave Electronics Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.