Correlation Between Columbia Sportswear and UET United

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

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

Diversification Opportunities for Columbia Sportswear and UET United

0.42

Correlation Coefficient

Columbia Sportswear  UET United

Very weak diversification

The 3 months correlation between Columbia and UET is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Sportswear and UET United Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UET United Electronic and Columbia Sportswear 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 Columbia Sportswear are associated (or correlated) with UET United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UET United Electronic has no effect on the direction of Columbia Sportswear i.e., Columbia Sportswear and UET United go up and down completely randomly.

Pair Corralation between Columbia Sportswear and UET United

Assuming the 90 days horizon Columbia Sportswear is expected to generate 0.4 times more return on investment than UET United. However, Columbia Sportswear is 2.5 times less risky than UET United. It trades about 0.14 of its potential returns per unit of risk. UET United Electronic is currently generating about -0.02 per unit of risk. If you would invest  7,322  in Columbia Sportswear on September 28, 2024 and sell it today you would earn a total of  1,128  from holding Columbia Sportswear or generate 15.41% return on investment over 90 days.

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

Columbia Sportswear  vs.  UET United Electronic

Columbia Sportswear

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Sportswear are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Columbia Sportswear reported solid returns over the last few months and may actually be approaching a breakup point.

UET United Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UET United Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Columbia Sportswear and UET United

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

The idea behind Columbia Sportswear and UET United Electronic 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.