Correlation Between Universal Scientific and Kailong High

Can any of the company-specific risk be diversified away by investing in both Universal Scientific and Kailong High 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 Kailong High 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 Kailong High Technology, you can compare the effects of market volatilities on Universal Scientific and Kailong High 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 Kailong High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Scientific and Kailong High.

Diversification Opportunities for Universal Scientific and Kailong High

-0.32

Correlation Coefficient

Universal Scientific  Kailong High

Very good diversification

The 3 months correlation between Universal and Kailong is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Universal Scientific Industria and Kailong High Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kailong High Technology 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 Kailong High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kailong High Technology has no effect on the direction of Universal Scientific i.e., Universal Scientific and Kailong High go up and down completely randomly.

Pair Corralation between Universal Scientific and Kailong High

Assuming the 90 days trading horizon Universal Scientific is expected to generate 3.23 times less return on investment than Kailong High. But when comparing it to its historical volatility, Universal Scientific Industrial is 1.9 times less risky than Kailong High. It trades about 0.01 of its potential returns per unit of risk. Kailong High Technology is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Kailong High Technology on October 11, 2024 and sell it today you would lose (326.00) from holding Kailong High Technology or give up 23.29% of portfolio value over 90 days.

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

Universal Scientific Industria  vs.  Kailong High Technology

Universal Scientific

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Scientific Industrial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Kailong High Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Universal Scientific and Kailong High

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

The idea behind Universal Scientific Industrial and Kailong High Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.