Correlation Between Hexcel and United Overseas

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

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

Diversification Opportunities for Hexcel and United Overseas

0.27

Correlation Coefficient

Hexcel  United Overseas

Modest diversification

The 3 months correlation between Hexcel and United is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and United Overseas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Overseas Bank and Hexcel 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 Hexcel are associated (or correlated) with United Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Overseas Bank has no effect on the direction of Hexcel i.e., Hexcel and United Overseas go up and down completely randomly.

Pair Corralation between Hexcel and United Overseas

Assuming the 90 days horizon Hexcel is expected to under-perform the United Overseas. In addition to that, Hexcel is 1.28 times more volatile than United Overseas Bank. It trades about -0.13 of its total potential returns per unit of risk. United Overseas Bank is currently generating about 0.04 per unit of volatility. If you would invest  2,551  in United Overseas Bank on December 26, 2024 and sell it today you would earn a total of  79.00  from holding United Overseas Bank or generate 3.1% return on investment over 90 days.

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

Hexcel  vs.  United Overseas Bank

Hexcel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

United Overseas Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Overseas Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United Overseas is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hexcel and United Overseas

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

The idea behind Hexcel and United Overseas Bank 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.