Correlation Between Dividend Select and Uniteds

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

By analyzing existing cross correlation between Dividend Select 15 and Uniteds Limited, you can compare the effects of market volatilities on Dividend Select and Uniteds 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 Dividend Select with a short position of Uniteds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dividend Select and Uniteds.

Diversification Opportunities for Dividend Select and Uniteds

0.74

Correlation Coefficient

Dividend Select  Uniteds

Poor diversification

The 3 months correlation between Dividend and Uniteds is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dividend Select 15 and Uniteds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniteds Limited and Dividend Select 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 Dividend Select 15 are associated (or correlated) with Uniteds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniteds Limited has no effect on the direction of Dividend Select i.e., Dividend Select and Uniteds go up and down completely randomly.

Pair Corralation between Dividend Select and Uniteds

Assuming the 90 days horizon Dividend Select is expected to generate 1.2 times less return on investment than Uniteds. But when comparing it to its historical volatility, Dividend Select 15 is 1.26 times less risky than Uniteds. It trades about 0.1 of its potential returns per unit of risk. Uniteds Limited is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,083  in Uniteds Limited on October 5, 2024 and sell it today you would earn a total of  3,017  from holding Uniteds Limited or generate 29.92% return on investment over 90 days.

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

Dividend Select 15  vs.  Uniteds Limited

Dividend Select 15

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dividend Select 15 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dividend Select is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Uniteds Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Uniteds Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Uniteds is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dividend Select and Uniteds

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

The idea behind Dividend Select 15 and Uniteds Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.