Correlation Between Resideo Technologies and Universal Security

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

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

Diversification Opportunities for Resideo Technologies and Universal Security

0.87

Correlation Coefficient

Resideo Technologies  Universal Security

Very poor diversification

The 3 months correlation between Resideo and Universal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Resideo Technologies and Universal Security Instruments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Security and Resideo Technologies 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 Resideo Technologies are associated (or correlated) with Universal Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Security has no effect on the direction of Resideo Technologies i.e., Resideo Technologies and Universal Security go up and down completely randomly.

Pair Corralation between Resideo Technologies and Universal Security

Given the investment horizon of 90 days Resideo Technologies is expected to under-perform the Universal Security. But the stock apears to be less risky and, when comparing its historical volatility, Resideo Technologies is 1.04 times less risky than Universal Security. The stock trades about -0.21 of its potential returns per unit of risk. The Universal Security Instruments is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Universal Security Instruments on December 22, 2024 and sell it today you would lose (29.00) from holding Universal Security Instruments or give up 13.0% of portfolio value over 90 days.

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

Resideo Technologies  vs.  Universal Security Instruments

Resideo Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Resideo Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Universal Security

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Security Instruments 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 basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Resideo Technologies and Universal Security

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

The idea behind Resideo Technologies and Universal Security Instruments 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.