Correlation Between Univa Foods and Cambridge Technology

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

By analyzing existing cross correlation between Univa Foods Limited and Cambridge Technology Enterprises, you can compare the effects of market volatilities on Univa Foods and Cambridge Technology 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 Univa Foods with a short position of Cambridge Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Univa Foods and Cambridge Technology.

Diversification Opportunities for Univa Foods and Cambridge Technology

0.04

Correlation Coefficient

Univa Foods  Cambridge Technology

Significant diversification

The 3 months correlation between Univa and Cambridge is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Univa Foods Limited and Cambridge Technology Enterpris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cambridge Technology and Univa Foods 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 Univa Foods Limited are associated (or correlated) with Cambridge Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cambridge Technology has no effect on the direction of Univa Foods i.e., Univa Foods and Cambridge Technology go up and down completely randomly.

Pair Corralation between Univa Foods and Cambridge Technology

Assuming the 90 days trading horizon Univa Foods is expected to generate 4.1 times less return on investment than Cambridge Technology. But when comparing it to its historical volatility, Univa Foods Limited is 3.32 times less risky than Cambridge Technology. It trades about 0.22 of its potential returns per unit of risk. Cambridge Technology Enterprises is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8,582  in Cambridge Technology Enterprises on September 29, 2024 and sell it today you would earn a total of  1,804  from holding Cambridge Technology Enterprises or generate 21.02% return on investment over 90 days.

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

Univa Foods Limited  vs.  Cambridge Technology Enterpris

Univa Foods Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Univa Foods Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Univa Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cambridge Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Univa Foods and Cambridge Technology

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

The idea behind Univa Foods Limited and Cambridge Technology Enterprises 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.