Correlation Between LUX ISLAND and UNIVERSAL PARTNERS

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

By analyzing existing cross correlation between LUX ISLAND RESORTS and UNIVERSAL PARTNERS LTD, you can compare the effects of market volatilities on LUX ISLAND and UNIVERSAL PARTNERS 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 LUX ISLAND with a short position of UNIVERSAL PARTNERS. Check out your portfolio center. Please also check ongoing floating volatility patterns of LUX ISLAND and UNIVERSAL PARTNERS.

Diversification Opportunities for LUX ISLAND and UNIVERSAL PARTNERS

0.0

Correlation Coefficient

LUX ISLAND  UNIVERSAL PARTNERS

Pay attention - limited upside

The 3 months correlation between LUX and UNIVERSAL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LUX ISLAND RESORTS and UNIVERSAL PARTNERS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNIVERSAL PARTNERS LTD and LUX ISLAND 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 LUX ISLAND RESORTS are associated (or correlated) with UNIVERSAL PARTNERS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNIVERSAL PARTNERS LTD has no effect on the direction of LUX ISLAND i.e., LUX ISLAND and UNIVERSAL PARTNERS go up and down completely randomly.

Pair Corralation between LUX ISLAND and UNIVERSAL PARTNERS

Assuming the 90 days trading horizon LUX ISLAND RESORTS is expected to generate 2.82 times more return on investment than UNIVERSAL PARTNERS. However, LUX ISLAND is 2.82 times more volatile than UNIVERSAL PARTNERS LTD. It trades about 0.04 of its potential returns per unit of risk. UNIVERSAL PARTNERS LTD is currently generating about -0.05 per unit of risk. If you would invest  4,591  in LUX ISLAND RESORTS on October 25, 2024 and sell it today you would earn a total of  909.00  from holding LUX ISLAND RESORTS or generate 19.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	92.65%
Values	Daily Returns

LUX ISLAND RESORTS  vs.  UNIVERSAL PARTNERS LTD

LUX ISLAND RESORTS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LUX ISLAND RESORTS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, LUX ISLAND is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

UNIVERSAL PARTNERS LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNIVERSAL PARTNERS LTD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, UNIVERSAL PARTNERS is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with LUX ISLAND and UNIVERSAL PARTNERS

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

The idea behind LUX ISLAND RESORTS and UNIVERSAL PARTNERS LTD 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.