Correlation Between UCB SA and Cenergy Holdings

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

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

Diversification Opportunities for UCB SA and Cenergy Holdings

0.36

Correlation Coefficient

UCB SA  Cenergy Holdings

Weak diversification

The 3 months correlation between UCB and Cenergy is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and Cenergy Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenergy Holdings and UCB SA 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 UCB SA are associated (or correlated) with Cenergy Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenergy Holdings has no effect on the direction of UCB SA i.e., UCB SA and Cenergy Holdings go up and down completely randomly.

Pair Corralation between UCB SA and Cenergy Holdings

Assuming the 90 days trading horizon UCB SA is expected to generate 0.92 times more return on investment than Cenergy Holdings. However, UCB SA is 1.09 times less risky than Cenergy Holdings. It trades about 0.06 of its potential returns per unit of risk. Cenergy Holdings SA is currently generating about 0.0 per unit of risk. If you would invest  18,525  in UCB SA on December 5, 2024 and sell it today you would earn a total of  980.00  from holding UCB SA or generate 5.29% return on investment over 90 days.

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

UCB SA  vs.  Cenergy Holdings SA

UCB SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UCB SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, UCB SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Cenergy Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cenergy Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Cenergy Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UCB SA and Cenergy Holdings

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

The idea behind UCB SA and Cenergy Holdings SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.