Correlation Between UPS CDR and Velan

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

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

Diversification Opportunities for UPS CDR and Velan

-0.17

Correlation Coefficient

UPS CDR  Velan

Good diversification

The 3 months correlation between UPS and Velan is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding UPS CDR and Velan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velan Inc and UPS CDR 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 UPS CDR are associated (or correlated) with Velan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velan Inc has no effect on the direction of UPS CDR i.e., UPS CDR and Velan go up and down completely randomly.

Pair Corralation between UPS CDR and Velan

Assuming the 90 days trading horizon UPS CDR is expected to under-perform the Velan. But the stock apears to be less risky and, when comparing its historical volatility, UPS CDR is 2.64 times less risky than Velan. The stock trades about -0.07 of its potential returns per unit of risk. The Velan Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,058  in Velan Inc on December 28, 2024 and sell it today you would earn a total of  572.00  from holding Velan Inc or generate 54.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

UPS CDR  vs.  Velan Inc

UPS CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days UPS CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Velan Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Velan Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Velan displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UPS CDR and Velan

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

The idea behind UPS CDR and Velan 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.