Correlation Between Unifique Telecomunicaes and Howmet Aerospace

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

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

Diversification Opportunities for Unifique Telecomunicaes and Howmet Aerospace

-0.7

Correlation Coefficient

Unifique Telecomunicaes  Howmet Aerospace

Excellent diversification

The 3 months correlation between Unifique and Howmet is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Unifique Telecomunicaes SA and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace and Unifique Telecomunicaes 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 Unifique Telecomunicaes SA are associated (or correlated) with Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of Unifique Telecomunicaes i.e., Unifique Telecomunicaes and Howmet Aerospace go up and down completely randomly.

Pair Corralation between Unifique Telecomunicaes and Howmet Aerospace

Assuming the 90 days trading horizon Unifique Telecomunicaes SA is expected to under-perform the Howmet Aerospace. In addition to that, Unifique Telecomunicaes is 1.1 times more volatile than Howmet Aerospace. It trades about -0.08 of its total potential returns per unit of risk. Howmet Aerospace is currently generating about 0.26 per unit of volatility. If you would invest  57,391  in Howmet Aerospace on October 24, 2024 and sell it today you would earn a total of  18,944  from holding Howmet Aerospace or generate 33.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Unifique Telecomunicaes SA  vs.  Howmet Aerospace

Unifique Telecomunicaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unifique Telecomunicaes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Howmet Aerospace

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Howmet Aerospace sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unifique Telecomunicaes and Howmet Aerospace

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

The idea behind Unifique Telecomunicaes SA and Howmet Aerospace 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.