Correlation Between Universe Pharmaceuticals and CNA Financial

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

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

Diversification Opportunities for Universe Pharmaceuticals and CNA Financial

0.3

Correlation Coefficient

Universe Pharmaceuticals  CNA Financial

Weak diversification

The 3 months correlation between Universe and CNA is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Universe Pharmaceuticals and CNA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNA Financial and Universe Pharmaceuticals 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 Universe Pharmaceuticals are associated (or correlated) with CNA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNA Financial has no effect on the direction of Universe Pharmaceuticals i.e., Universe Pharmaceuticals and CNA Financial go up and down completely randomly.

Pair Corralation between Universe Pharmaceuticals and CNA Financial

Considering the 90-day investment horizon Universe Pharmaceuticals is expected to under-perform the CNA Financial. In addition to that, Universe Pharmaceuticals is 24.21 times more volatile than CNA Financial. It trades about -0.04 of its total potential returns per unit of risk. CNA Financial is currently generating about -0.02 per unit of volatility. If you would invest  4,951  in CNA Financial on September 12, 2024 and sell it today you would lose (121.00) from holding CNA Financial or give up 2.44% of portfolio value over 90 days.

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

Universe Pharmaceuticals  vs.  CNA Financial

Universe Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universe Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

CNA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Universe Pharmaceuticals and CNA Financial

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

The idea behind Universe Pharmaceuticals and CNA Financial 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.