Correlation Between UET United and Bank of America

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

By analyzing existing cross correlation between UET United Electronic and Verizon Communications, you can compare the effects of market volatilities on UET United and Bank of America 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 UET United with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of UET United and Bank of America.

Diversification Opportunities for UET United and Bank of America

0.25

Correlation Coefficient

UET United  Bank of America

Modest diversification

The 3 months correlation between UET and Bank is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding UET United Electronic and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and UET United 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 UET United Electronic are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of UET United i.e., UET United and Bank of America go up and down completely randomly.

Pair Corralation between UET United and Bank of America

Assuming the 90 days trading horizon UET United is expected to generate 2.23 times less return on investment than Bank of America. In addition to that, UET United is 3.59 times more volatile than Verizon Communications. It trades about 0.02 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.15 per unit of volatility. If you would invest  3,723  in Verizon Communications on August 31, 2024 and sell it today you would earn a total of  477.00  from holding Verizon Communications or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

UET United Electronic  vs.  Verizon Communications

UET United Electronic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UET United Electronic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, UET United is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Verizon Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with UET United and Bank of America

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

The idea behind UET United Electronic and Verizon Communications 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.