Correlation Between Ubiquiti Networks and Belden

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

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

Diversification Opportunities for Ubiquiti Networks and Belden

0.8

Correlation Coefficient

Ubiquiti Networks  Belden

Very poor diversification

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

Pair Corralation between Ubiquiti Networks and Belden

Allowing for the 90-day total investment horizon Ubiquiti Networks is expected to generate 1.86 times more return on investment than Belden. However, Ubiquiti Networks is 1.86 times more volatile than Belden Inc. It trades about -0.02 of its potential returns per unit of risk. Belden Inc is currently generating about -0.05 per unit of risk. If you would invest  33,494  in Ubiquiti Networks on December 28, 2024 and sell it today you would lose (2,064) from holding Ubiquiti Networks or give up 6.16% of portfolio value over 90 days.

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

Ubiquiti Networks  vs.  Belden Inc

Ubiquiti Networks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ubiquiti Networks has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Ubiquiti Networks is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Belden Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Belden Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ubiquiti Networks and Belden

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

The idea behind Ubiquiti Networks and Belden 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.