Correlation Between Universal Entertainment and Digilife Technologies

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

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

Diversification Opportunities for Universal Entertainment and Digilife Technologies

0.3

Correlation Coefficient

Universal Entertainment  Digilife Technologies

Weak diversification

The 3 months correlation between Universal and Digilife is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and Digilife Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digilife Technologies and Universal Entertainment 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 Universal Entertainment are associated (or correlated) with Digilife Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digilife Technologies has no effect on the direction of Universal Entertainment i.e., Universal Entertainment and Digilife Technologies go up and down completely randomly.

Pair Corralation between Universal Entertainment and Digilife Technologies

Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the Digilife Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Universal Entertainment is 1.09 times less risky than Digilife Technologies. The stock trades about -0.11 of its potential returns per unit of risk. The Digilife Technologies Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  79.00  in Digilife Technologies Limited on September 13, 2024 and sell it today you would lose (3.00) from holding Digilife Technologies Limited or give up 3.8% of portfolio value over 90 days.

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

Universal Entertainment  vs.  Digilife Technologies Limited

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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Digilife Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digilife Technologies Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Digilife Technologies is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Universal Entertainment and Digilife Technologies

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

The idea behind Universal Entertainment and Digilife Technologies Limited 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.