Correlation Between Universal Power and Social Detention

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

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

Diversification Opportunities for Universal Power and Social Detention

-0.7

Correlation Coefficient

Universal Power  Social Detention

Excellent diversification

The 3 months correlation between Universal and Social is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Universal Power Industry and Social Detention in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Social Detention and Universal Power 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 Power Industry are associated (or correlated) with Social Detention. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Social Detention has no effect on the direction of Universal Power i.e., Universal Power and Social Detention go up and down completely randomly.

Pair Corralation between Universal Power and Social Detention

Given the investment horizon of 90 days Universal Power Industry is expected to under-perform the Social Detention. In addition to that, Universal Power is 1.51 times more volatile than Social Detention. It trades about -0.12 of its total potential returns per unit of risk. Social Detention is currently generating about 0.08 per unit of volatility. If you would invest  0.50  in Social Detention on December 30, 2024 and sell it today you would earn a total of  0.10  from holding Social Detention or generate 20.0% return on investment over 90 days.

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

Universal Power Industry  vs.  Social Detention

Universal Power Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Power Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Social Detention

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Social Detention are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Social Detention exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Power and Social Detention

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

The idea behind Universal Power Industry and Social Detention 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.