Correlation Between Universal Stainless and Belden

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

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

Diversification Opportunities for Universal Stainless and Belden

0.04

Correlation Coefficient

Universal Stainless  Belden

Significant diversification

The 3 months correlation between Universal and Belden is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Belden Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Belden Inc and Universal Stainless 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 Stainless Alloy are associated (or correlated) with Belden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Belden Inc has no effect on the direction of Universal Stainless i.e., Universal Stainless and Belden go up and down completely randomly.

Pair Corralation between Universal Stainless and Belden

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 0.15 times more return on investment than Belden. However, Universal Stainless Alloy is 6.56 times less risky than Belden. It trades about 0.11 of its potential returns per unit of risk. Belden Inc is currently generating about 0.02 per unit of risk. If you would invest  4,357  in Universal Stainless Alloy on October 22, 2024 and sell it today you would earn a total of  88.00  from holding Universal Stainless Alloy or generate 2.02% return on investment over 90 days.

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

Universal Stainless Alloy  vs.  Belden Inc

Universal Stainless Alloy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Universal Stainless is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Belden Inc

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Belden is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Universal Stainless and Belden

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

The idea behind Universal Stainless Alloy and Belden 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..