Correlation Between SPORTING and Universal Corp

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

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

Diversification Opportunities for SPORTING and Universal Corp

0.01

Correlation Coefficient

SPORTING  Universal Corp

Significant diversification

The 3 months correlation between SPORTING and Universal is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and Universal Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Corp and SPORTING 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 SPORTING are associated (or correlated) with Universal Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Corp has no effect on the direction of SPORTING i.e., SPORTING and Universal Corp go up and down completely randomly.

Pair Corralation between SPORTING and Universal Corp

Assuming the 90 days trading horizon SPORTING is expected to generate 1.43 times more return on investment than Universal Corp. However, SPORTING is 1.43 times more volatile than Universal Corp. It trades about 0.15 of its potential returns per unit of risk. Universal Corp is currently generating about -0.01 per unit of risk. If you would invest  80.00  in SPORTING on December 24, 2024 and sell it today you would earn a total of  16.00  from holding SPORTING or generate 20.0% return on investment over 90 days.

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

SPORTING  vs.  Universal Corp

SPORTING

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, SPORTING unveiled solid returns over the last few months and may actually be approaching a breakup point.

Universal Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Universal Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SPORTING and Universal Corp

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

The idea behind SPORTING and Universal Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.