Correlation Between Big Tree and United Guardian

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

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

Diversification Opportunities for Big Tree and United Guardian

-0.24

Correlation Coefficient

Big Tree  United Guardian

Very good diversification

The 3 months correlation between Big and United is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Big Tree Cloud and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian and Big Tree 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 Big Tree Cloud are associated (or correlated) with United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Big Tree i.e., Big Tree and United Guardian go up and down completely randomly.

Pair Corralation between Big Tree and United Guardian

Considering the 90-day investment horizon Big Tree Cloud is expected to under-perform the United Guardian. In addition to that, Big Tree is 4.64 times more volatile than United Guardian. It trades about -0.12 of its total potential returns per unit of risk. United Guardian is currently generating about -0.03 per unit of volatility. If you would invest  943.00  in United Guardian on December 26, 2024 and sell it today you would lose (47.00) from holding United Guardian or give up 4.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Big Tree Cloud  vs.  United Guardian

Big Tree Cloud

Risk-Adjusted Performance

Very Weak

Over the last 90 days Big Tree Cloud has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

United Guardian

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Big Tree and United Guardian

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

The idea behind Big Tree Cloud and United Guardian 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.