Correlation Between Dream Unlimited and UPS CDR

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

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

Diversification Opportunities for Dream Unlimited and UPS CDR

-0.16

Correlation Coefficient

Dream Unlimited  UPS CDR

Good diversification

The 3 months correlation between Dream and UPS is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dream Unlimited Corp and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR and Dream Unlimited 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 Dream Unlimited Corp 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 Dream Unlimited i.e., Dream Unlimited and UPS CDR go up and down completely randomly.

Pair Corralation between Dream Unlimited and UPS CDR

Assuming the 90 days trading horizon Dream Unlimited Corp is expected to generate 0.78 times more return on investment than UPS CDR. However, Dream Unlimited Corp is 1.29 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 -0.07 per unit of risk. If you would invest  2,178  in Dream Unlimited Corp on December 28, 2024 and sell it today you would lose (165.00) from holding Dream Unlimited Corp or give up 7.58% of portfolio value over 90 days.

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

Dream Unlimited Corp  vs.  UPS CDR

Dream Unlimited Corp

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Dream Unlimited and UPS CDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dream Unlimited 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 Dream Unlimited Corp 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.