Correlation Between American Green and Universal

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

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

Diversification Opportunities for American Green and Universal

0.63

Correlation Coefficient

American Green  Universal

Poor diversification

The 3 months correlation between American and Universal is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Green and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and American Green 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 American Green are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of American Green i.e., American Green and Universal go up and down completely randomly.

Pair Corralation between American Green and Universal

Given the investment horizon of 90 days American Green is expected to generate 15.62 times more return on investment than Universal. However, American Green is 15.62 times more volatile than Universal. It trades about 0.07 of its potential returns per unit of risk. Universal is currently generating about 0.01 per unit of risk. If you would invest  0.15  in American Green on October 12, 2024 and sell it today you would lose (0.10) from holding American Green or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

American Green  vs.  Universal

American Green

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Green are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, American Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Universal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American Green and Universal

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

The idea behind American Green and Universal 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.