Correlation Between Universal Stainless and Great Elm

Can any of the company-specific risk be diversified away by investing in both Universal Stainless and Great Elm 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 Great Elm 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 Great Elm Capital, you can compare the effects of market volatilities on Universal Stainless and Great Elm 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 Great Elm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Stainless and Great Elm.

Diversification Opportunities for Universal Stainless and Great Elm

0.4

Correlation Coefficient

Universal Stainless  Great Elm

Very weak diversification

The 3 months correlation between Universal and Great is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Great Elm Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Elm Capital 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 Great Elm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Elm Capital has no effect on the direction of Universal Stainless i.e., Universal Stainless and Great Elm go up and down completely randomly.

Pair Corralation between Universal Stainless and Great Elm

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 3.68 times more return on investment than Great Elm. However, Universal Stainless is 3.68 times more volatile than Great Elm Capital. It trades about 0.19 of its potential returns per unit of risk. Great Elm Capital is currently generating about 0.09 per unit of risk. If you would invest  3,916  in Universal Stainless Alloy on October 10, 2024 and sell it today you would earn a total of  484.00  from holding Universal Stainless Alloy or generate 12.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.16%
Values	Daily Returns

Universal Stainless Alloy  vs.  Great Elm Capital

Universal Stainless Alloy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Universal Stainless may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Great Elm Capital

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Elm Capital are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Great Elm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Universal Stainless and Great Elm

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

The idea behind Universal Stainless Alloy and Great Elm 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.