Correlation Between UET United and Cisco Systems

Can any of the company-specific risk be diversified away by investing in both UET United and Cisco 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 UET United and Cisco Systems 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 Cisco Systems, you can compare the effects of market volatilities on UET United and Cisco 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 UET United with a short position of Cisco Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of UET United and Cisco Systems.

Diversification Opportunities for UET United and Cisco Systems

-0.21

Correlation Coefficient

UET United  Cisco Systems

Very good diversification

The 3 months correlation between UET and Cisco is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding UET United Electronic and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of UET United i.e., UET United and Cisco Systems go up and down completely randomly.

Pair Corralation between UET United and Cisco Systems

Assuming the 90 days trading horizon UET United Electronic is expected to generate 3.28 times more return on investment than Cisco Systems. However, UET United is 3.28 times more volatile than Cisco Systems. It trades about 0.08 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.0 per unit of risk. If you would invest  88.00  in UET United Electronic on December 29, 2024 and sell it today you would earn a total of  15.00  from holding UET United Electronic or generate 17.05% return on investment over 90 days.

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

UET United Electronic  vs.  Cisco Systems

UET United Electronic

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UET United Electronic are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, UET United unveiled solid returns over the last few months and may actually be approaching a breakup point.

Cisco Systems

Risk-Adjusted Performance

Weak

Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cisco Systems is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UET United and Cisco Systems

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

The idea behind UET United Electronic and Cisco 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.