Correlation Between UNIVRS and MEC

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

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

Diversification Opportunities for UNIVRS and MEC

0.0

Correlation Coefficient

UNIVRS  MEC

Pay attention - limited upside

The 3 months correlation between UNIVRS and MEC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding UNIVRS and MEC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEC and UNIVRS 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 UNIVRS are associated (or correlated) with MEC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEC has no effect on the direction of UNIVRS i.e., UNIVRS and MEC go up and down completely randomly.

Pair Corralation between UNIVRS and MEC

If you would invest (100.00) in MEC on December 30, 2024 and sell it today you would earn a total of  100.00  from holding MEC or generate -100.0% return on investment over 90 days.

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

UNIVRS  vs.  MEC

UNIVRS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNIVRS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, UNIVRS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MEC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with UNIVRS and MEC

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

The idea behind UNIVRS and MEC 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.