Correlation Between Financial and UPS CDR

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

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

Diversification Opportunities for Financial and UPS CDR

-0.52

Correlation Coefficient

Financial  UPS CDR

Excellent diversification

The 3 months correlation between Financial and UPS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Financial 15 Split and UPS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPS CDR and Financial 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 Financial 15 Split are associated (or correlated) with UPS CDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPS CDR has no effect on the direction of Financial i.e., Financial and UPS CDR go up and down completely randomly.

Pair Corralation between Financial and UPS CDR

Assuming the 90 days trading horizon Financial 15 Split is expected to generate 0.29 times more return on investment than UPS CDR. However, Financial 15 Split is 3.43 times less risky than UPS CDR. It trades about 0.08 of its potential returns per unit of risk. UPS CDR is currently generating about -0.05 per unit of risk. If you would invest  1,052  in Financial 15 Split on December 23, 2024 and sell it today you would earn a total of  31.00  from holding Financial 15 Split or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Financial 15 Split  vs.  UPS CDR

Financial 15 Split

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Financial 15 Split are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

UPS CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Financial and UPS CDR

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

The idea behind Financial 15 Split and UPS CDR 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 CEOs Directory module to screen CEOs from public companies around the world.