Correlation Between Element Global and Universal Systems

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

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

Diversification Opportunities for Element Global and Universal Systems

1.0

Correlation Coefficient

Element Global  Universal Systems

No risk reduction

The 3 months correlation between Element and Universal is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Element Global and Universal Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Systems and Element Global 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 Element Global are associated (or correlated) with Universal Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Systems has no effect on the direction of Element Global i.e., Element Global and Universal Systems go up and down completely randomly.

Pair Corralation between Element Global and Universal Systems

If you would invest  0.01  in Universal Systems on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Universal Systems or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	96.72%
Values	Daily Returns

Element Global  vs.  Universal Systems

Element Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days Element Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Element Global is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Universal Systems

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Element Global and Universal Systems

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

The idea behind Element Global and Universal Systems 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.