Correlation Between Caribbean Utilities and UPS CDR

Can any of the company-specific risk be diversified away by investing in both Caribbean Utilities and UPS CDR 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 Caribbean Utilities and UPS CDR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caribbean Utilities and UPS CDR, you can compare the effects of market volatilities on Caribbean Utilities and UPS CDR 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 Caribbean Utilities with a short position of UPS CDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribbean Utilities and UPS CDR.

Diversification Opportunities for Caribbean Utilities and UPS CDR

0.64

Correlation Coefficient

Caribbean Utilities  UPS CDR

Poor diversification

The 3 months correlation between Caribbean and UPS is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Caribbean Utilities and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR and Caribbean Utilities 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 Caribbean Utilities are associated (or correlated) with UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of Caribbean Utilities i.e., Caribbean Utilities and UPS CDR go up and down completely randomly.

Pair Corralation between Caribbean Utilities and UPS CDR

Assuming the 90 days trading horizon Caribbean Utilities is expected to generate 0.51 times more return on investment than UPS CDR. However, Caribbean Utilities is 1.97 times less risky than UPS CDR. It trades about -0.07 of its potential returns per unit of risk. UPS CDR is currently generating about -0.05 per unit of risk. If you would invest  1,398  in Caribbean Utilities on December 25, 2024 and sell it today you would lose (67.00) from holding Caribbean Utilities or give up 4.79% of portfolio value over 90 days.

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

Caribbean Utilities  vs.  UPS CDR

Caribbean Utilities

Risk-Adjusted Performance

Very Weak

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

UPS CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Caribbean Utilities and UPS CDR

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

The idea behind Caribbean Utilities and UPS CDR 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 CEOs Directory module to screen CEOs from public companies around the world.