Correlation Between Formetal and UJU Electronics

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

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

Diversification Opportunities for Formetal and UJU Electronics

0.13

Correlation Coefficient

Formetal  UJU Electronics

Average diversification

The 3 months correlation between Formetal and UJU is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and UJU Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UJU Electronics and Formetal 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 Formetal Co are associated (or correlated) with UJU Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UJU Electronics has no effect on the direction of Formetal i.e., Formetal and UJU Electronics go up and down completely randomly.

Pair Corralation between Formetal and UJU Electronics

Assuming the 90 days trading horizon Formetal is expected to generate 1.43 times less return on investment than UJU Electronics. In addition to that, Formetal is 1.29 times more volatile than UJU Electronics Co. It trades about 0.2 of its total potential returns per unit of risk. UJU Electronics Co is currently generating about 0.37 per unit of volatility. If you would invest  1,243,923  in UJU Electronics Co on October 2, 2024 and sell it today you would earn a total of  446,077  from holding UJU Electronics Co or generate 35.86% return on investment over 90 days.

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

Formetal Co  vs.  UJU Electronics Co

Formetal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Formetal Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Formetal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UJU Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UJU Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UJU Electronics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Formetal and UJU Electronics

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

The idea behind Formetal Co and UJU 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.