Correlation Between Coreshares Index and Universal Partners

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

By analyzing existing cross correlation between Coreshares Index Tracker and Universal Partners, you can compare the effects of market volatilities on Coreshares Index and Universal Partners 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 Coreshares Index with a short position of Universal Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coreshares Index and Universal Partners.

Diversification Opportunities for Coreshares Index and Universal Partners

0.58

Correlation Coefficient

Coreshares Index  Universal Partners

Very weak diversification

The 3 months correlation between Coreshares and Universal is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker and Universal Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Partners and Coreshares Index 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 Coreshares Index Tracker are associated (or correlated) with Universal Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Partners has no effect on the direction of Coreshares Index i.e., Coreshares Index and Universal Partners go up and down completely randomly.

Pair Corralation between Coreshares Index and Universal Partners

Assuming the 90 days trading horizon Coreshares Index Tracker is expected to under-perform the Universal Partners. But the etf apears to be less risky and, when comparing its historical volatility, Coreshares Index Tracker is 2.06 times less risky than Universal Partners. The etf trades about -0.01 of its potential returns per unit of risk. The Universal Partners is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  200,000  in Universal Partners on October 12, 2024 and sell it today you would earn a total of  20,000  from holding Universal Partners or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Coreshares Index Tracker  vs.  Universal Partners

Coreshares Index Tracker

Risk-Adjusted Performance

0 of 100

Very Weak

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

Universal Partners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Universal Partners may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Coreshares Index and Universal Partners

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

The idea behind Coreshares Index Tracker and Universal Partners 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.