Correlation Between UDR and WESTAR

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

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

Diversification Opportunities for UDR and WESTAR

-0.31

Correlation Coefficient

UDR  WESTAR

Very good diversification

The 3 months correlation between UDR and WESTAR is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding UDR Inc and WESTAR ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTAR ENERGY INC and UDR 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 UDR Inc are associated (or correlated) with WESTAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTAR ENERGY INC has no effect on the direction of UDR i.e., UDR and WESTAR go up and down completely randomly.

Pair Corralation between UDR and WESTAR

Considering the 90-day investment horizon UDR Inc is expected to generate 0.54 times more return on investment than WESTAR. However, UDR Inc is 1.84 times less risky than WESTAR. It trades about 0.06 of its potential returns per unit of risk. WESTAR ENERGY INC is currently generating about -0.07 per unit of risk. If you would invest  4,449  in UDR Inc on August 31, 2024 and sell it today you would earn a total of  184.00  from holding UDR Inc or generate 4.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	39.68%
Values	Daily Returns

UDR Inc  vs.  WESTAR ENERGY INC

UDR Inc

Risk-Adjusted Performance

4 of 100

Insignificant

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

WESTAR ENERGY INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WESTAR ENERGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for WESTAR ENERGY INC investors.

Pair Trading with UDR and WESTAR

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

The idea behind UDR Inc and WESTAR ENERGY INC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.