Correlation Between Universal Electronics and Sharp Corp

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

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

Diversification Opportunities for Universal Electronics and Sharp Corp

-0.28

Correlation Coefficient

Universal Electronics  Sharp Corp

Very good diversification

The 3 months correlation between Universal and Sharp is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and Sharp Corp ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sharp Corp ADR 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 Sharp Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sharp Corp ADR has no effect on the direction of Universal Electronics i.e., Universal Electronics and Sharp Corp go up and down completely randomly.

Pair Corralation between Universal Electronics and Sharp Corp

Given the investment horizon of 90 days Universal Electronics is expected to generate 1.1 times less return on investment than Sharp Corp. But when comparing it to its historical volatility, Universal Electronics is 1.1 times less risky than Sharp Corp. It trades about 0.03 of its potential returns per unit of risk. Sharp Corp ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  146.00  in Sharp Corp ADR on September 5, 2024 and sell it today you would earn a total of  4.00  from holding Sharp Corp ADR or generate 2.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Universal Electronics  vs.  Sharp Corp ADR

Universal Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, Universal Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sharp Corp ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sharp Corp ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Sharp Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal Electronics and Sharp Corp

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

The idea behind Universal Electronics and Sharp Corp ADR 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.

Check out your portfolio center.

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.