Correlation Between Uni President and Hotai

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

By analyzing existing cross correlation between Uni President Enterprises Corp and Hotai Motor Co, you can compare the effects of market volatilities on Uni President and Hotai 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 Uni President with a short position of Hotai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uni President and Hotai.

Diversification Opportunities for Uni President and Hotai

0.34

Correlation Coefficient

Uni President  Hotai

Weak diversification

The 3 months correlation between Uni and Hotai is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Uni President Enterprises Corp and Hotai Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotai Motor and Uni President 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 Uni President Enterprises Corp are associated (or correlated) with Hotai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotai Motor has no effect on the direction of Uni President i.e., Uni President and Hotai go up and down completely randomly.

Pair Corralation between Uni President and Hotai

Assuming the 90 days trading horizon Uni President Enterprises Corp is expected to under-perform the Hotai. In addition to that, Uni President is 1.22 times more volatile than Hotai Motor Co. It trades about -0.03 of its total potential returns per unit of risk. Hotai Motor Co is currently generating about 0.04 per unit of volatility. If you would invest  61,000  in Hotai Motor Co on December 21, 2024 and sell it today you would earn a total of  1,200  from holding Hotai Motor Co or generate 1.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Uni President Enterprises Corp  vs.  Hotai Motor Co

Uni President Enterp

Risk-Adjusted Performance

Very Weak

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

Hotai Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hotai Motor Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hotai is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Uni President and Hotai

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

The idea behind Uni President Enterprises Corp and Hotai Motor 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.