Correlation Between Papaya Growth and Universal

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

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

Diversification Opportunities for Papaya Growth and Universal

0.32

Correlation Coefficient

Papaya Growth  Universal

Weak diversification

The 3 months correlation between Papaya and Universal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Papaya Growth Opportunity and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Papaya Growth 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 Papaya Growth Opportunity are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Papaya Growth i.e., Papaya Growth and Universal go up and down completely randomly.

Pair Corralation between Papaya Growth and Universal

Assuming the 90 days horizon Papaya Growth is expected to generate 1.88 times less return on investment than Universal. But when comparing it to its historical volatility, Papaya Growth Opportunity is 1.21 times less risky than Universal. It trades about 0.02 of its potential returns per unit of risk. Universal is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,712  in Universal on September 4, 2024 and sell it today you would earn a total of  1,006  from holding Universal or generate 21.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Papaya Growth Opportunity  vs.  Universal

Papaya Growth Opportunity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Papaya Growth Opportunity are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Universal

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Papaya Growth and Universal

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

The idea behind Papaya Growth Opportunity and Universal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.