Correlation Between Universal Cement and Goldsun Building

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

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

Diversification Opportunities for Universal Cement and Goldsun Building

0.28

Correlation Coefficient

Universal Cement  Goldsun Building

Modest diversification

The 3 months correlation between Universal and Goldsun is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Universal Cement Corp and Goldsun Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldsun Building Mat and Universal Cement 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 Cement Corp are associated (or correlated) with Goldsun Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldsun Building Mat has no effect on the direction of Universal Cement i.e., Universal Cement and Goldsun Building go up and down completely randomly.

Pair Corralation between Universal Cement and Goldsun Building

Assuming the 90 days trading horizon Universal Cement Corp is expected to generate 0.9 times more return on investment than Goldsun Building. However, Universal Cement Corp is 1.11 times less risky than Goldsun Building. It trades about -0.01 of its potential returns per unit of risk. Goldsun Building Materials is currently generating about -0.39 per unit of risk. If you would invest  2,930  in Universal Cement Corp on September 28, 2024 and sell it today you would lose (15.00) from holding Universal Cement Corp or give up 0.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Universal Cement Corp  vs.  Goldsun Building Materials

Universal Cement Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Cement Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Universal Cement is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Goldsun Building Mat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldsun Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Universal Cement and Goldsun Building

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

The idea behind Universal Cement Corp and Goldsun Building Materials 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.