Correlation Between Universal Electronics and TCL Electronics

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

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

Diversification Opportunities for Universal Electronics and TCL Electronics

-0.8

Correlation Coefficient

Universal Electronics  TCL Electronics

Pay attention - limited upside

The 3 months correlation between Universal and TCL is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and TCL Electronics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCL Electronics Holdings 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 TCL Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCL Electronics Holdings has no effect on the direction of Universal Electronics i.e., Universal Electronics and TCL Electronics go up and down completely randomly.

Pair Corralation between Universal Electronics and TCL Electronics

Given the investment horizon of 90 days Universal Electronics is expected to under-perform the TCL Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Universal Electronics is 1.3 times less risky than TCL Electronics. The stock trades about -0.28 of its potential returns per unit of risk. The TCL Electronics Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  81.00  in TCL Electronics Holdings on December 28, 2024 and sell it today you would earn a total of  36.00  from holding TCL Electronics Holdings or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	90.16%
Values	Daily Returns

Universal Electronics  vs.  TCL Electronics Holdings

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.

TCL Electronics Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TCL Electronics Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, TCL Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Electronics and TCL Electronics

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

The idea behind Universal Electronics and TCL Electronics Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.