Correlation Between Urbana and Princeton Capital

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

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

Diversification Opportunities for Urbana and Princeton Capital

-0.17

Correlation Coefficient

Urbana  Princeton Capital

Good diversification

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

Pair Corralation between Urbana and Princeton Capital

Assuming the 90 days horizon Urbana is expected to generate 0.38 times more return on investment than Princeton Capital. However, Urbana is 2.66 times less risky than Princeton Capital. It trades about 0.08 of its potential returns per unit of risk. Princeton Capital is currently generating about 0.01 per unit of risk. If you would invest  392.00  in Urbana on December 30, 2024 and sell it today you would earn a total of  45.00  from holding Urbana or generate 11.48% return on investment over 90 days.

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

Urbana  vs.  Princeton Capital

Urbana

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Urbana are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Urbana reported solid returns over the last few months and may actually be approaching a breakup point.

Princeton Capital

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Urbana and Princeton Capital

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

The idea behind Urbana and Princeton Capital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.