Correlation Between Orthopediatrics Corp and UFP Technologies

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

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

Diversification Opportunities for Orthopediatrics Corp and UFP Technologies

0.4

Correlation Coefficient

Orthopediatrics Corp  UFP Technologies

Very weak diversification

The 3 months correlation between Orthopediatrics and UFP is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Orthopediatrics Corp and UFP Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UFP Technologies and Orthopediatrics Corp 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 Orthopediatrics Corp are associated (or correlated) with UFP Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UFP Technologies has no effect on the direction of Orthopediatrics Corp i.e., Orthopediatrics Corp and UFP Technologies go up and down completely randomly.

Pair Corralation between Orthopediatrics Corp and UFP Technologies

Given the investment horizon of 90 days Orthopediatrics Corp is expected to under-perform the UFP Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Orthopediatrics Corp is 1.13 times less risky than UFP Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The UFP Technologies is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  32,426  in UFP Technologies on September 14, 2024 and sell it today you would lose (5,522) from holding UFP Technologies or give up 17.03% of portfolio value over 90 days.

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

Orthopediatrics Corp  vs.  UFP Technologies

Orthopediatrics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orthopediatrics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

UFP Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UFP Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Orthopediatrics Corp and UFP Technologies

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

The idea behind Orthopediatrics Corp and UFP Technologies 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.