Correlation Between VIVA WINE and Universal Entertainment

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

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

Diversification Opportunities for VIVA WINE and Universal Entertainment

0.92

Correlation Coefficient

VIVA WINE  Universal Entertainment

Almost no diversification

The 3 months correlation between VIVA and Universal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding VIVA WINE GROUP and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment and VIVA WINE 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 VIVA WINE GROUP are associated (or correlated) with Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of VIVA WINE i.e., VIVA WINE and Universal Entertainment go up and down completely randomly.

Pair Corralation between VIVA WINE and Universal Entertainment

Assuming the 90 days horizon VIVA WINE GROUP is expected to generate 0.37 times more return on investment than Universal Entertainment. However, VIVA WINE GROUP is 2.68 times less risky than Universal Entertainment. It trades about -0.09 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.1 per unit of risk. If you would invest  355.00  in VIVA WINE GROUP on October 6, 2024 and sell it today you would lose (20.00) from holding VIVA WINE GROUP or give up 5.63% of portfolio value over 90 days.

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

VIVA WINE GROUP  vs.  Universal Entertainment

VIVA WINE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

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

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with VIVA WINE and Universal Entertainment

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

The idea behind VIVA WINE GROUP and Universal Entertainment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.