Correlation Between Universal Electronics and GoPro

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

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

Diversification Opportunities for Universal Electronics and GoPro

0.89

Correlation Coefficient

Universal Electronics  GoPro

Very poor diversification

The 3 months correlation between Universal and GoPro is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and GoPro Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoPro Inc and Universal Electronics 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 Electronics are associated (or correlated) with GoPro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoPro Inc has no effect on the direction of Universal Electronics i.e., Universal Electronics and GoPro go up and down completely randomly.

Pair Corralation between Universal Electronics and GoPro

Given the investment horizon of 90 days Universal Electronics is expected to under-perform the GoPro. But the stock apears to be less risky and, when comparing its historical volatility, Universal Electronics is 1.56 times less risky than GoPro. The stock trades about -0.29 of its potential returns per unit of risk. The GoPro Inc is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  112.00  in GoPro Inc on December 29, 2024 and sell it today you would lose (43.00) from holding GoPro Inc or give up 38.39% of portfolio value over 90 days.

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

Universal Electronics  vs.  GoPro Inc

Universal Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

GoPro Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days GoPro Inc 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 very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Universal Electronics and GoPro

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

The idea behind Universal Electronics and GoPro 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.