Correlation Between Buyer Group and Universal Systems

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

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

Diversification Opportunities for Buyer Group and Universal Systems

0.0

Correlation Coefficient

Buyer Group  Universal Systems

Pay attention - limited upside

The 3 months correlation between Buyer and Universal is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Buyer Group International and Universal Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Systems and Buyer Group 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 Buyer Group International are associated (or correlated) with Universal Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Systems has no effect on the direction of Buyer Group i.e., Buyer Group and Universal Systems go up and down completely randomly.

Pair Corralation between Buyer Group and Universal Systems

Given the investment horizon of 90 days Buyer Group is expected to generate 2.89 times less return on investment than Universal Systems. But when comparing it to its historical volatility, Buyer Group International is 1.61 times less risky than Universal Systems. It trades about 0.02 of its potential returns per unit of risk. Universal Systems is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.22  in Universal Systems on October 27, 2024 and sell it today you would lose (0.21) from holding Universal Systems or give up 95.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Buyer Group International  vs.  Universal Systems

Buyer Group International

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Buyer Group International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Buyer Group reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Universal Systems is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Buyer Group and Universal Systems

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

The idea behind Buyer Group International and Universal Systems 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.