Correlation Between Universal Scientific and Zhejiang Crystal

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

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

Diversification Opportunities for Universal Scientific and Zhejiang Crystal

0.26

Correlation Coefficient

Universal Scientific  Zhejiang Crystal

Modest diversification

The 3 months correlation between Universal and Zhejiang is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Universal Scientific Industria and Zhejiang Crystal Optech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Crystal Optech and Universal Scientific 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 Scientific Industrial are associated (or correlated) with Zhejiang Crystal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Crystal Optech has no effect on the direction of Universal Scientific i.e., Universal Scientific and Zhejiang Crystal go up and down completely randomly.

Pair Corralation between Universal Scientific and Zhejiang Crystal

Assuming the 90 days trading horizon Universal Scientific Industrial is expected to under-perform the Zhejiang Crystal. But the stock apears to be less risky and, when comparing its historical volatility, Universal Scientific Industrial is 1.54 times less risky than Zhejiang Crystal. The stock trades about 0.0 of its potential returns per unit of risk. The Zhejiang Crystal Optech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,951  in Zhejiang Crystal Optech on October 9, 2024 and sell it today you would earn a total of  112.00  from holding Zhejiang Crystal Optech or generate 5.74% return on investment over 90 days.

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

Universal Scientific Industria  vs.  Zhejiang Crystal Optech

Universal Scientific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Scientific Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Universal Scientific is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Zhejiang Crystal Optech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Crystal Optech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Crystal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal Scientific and Zhejiang Crystal

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

The idea behind Universal Scientific Industrial and Zhejiang Crystal Optech 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.