Correlation Between Universal Stainless and Renault SA

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

Diversification Opportunities for Universal Stainless and Renault SA

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Universal and Renault is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Renault SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renault SA 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 Renault SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renault SA has no effect on the direction of Universal Stainless i.e., Universal Stainless and Renault SA go up and down completely randomly.

Pair Corralation between Universal Stainless and Renault SA

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 1.13 times more return on investment than Renault SA. However, Universal Stainless is 1.13 times more volatile than Renault SA. It trades about 0.12 of its potential returns per unit of risk. Renault SA is currently generating about 0.08 per unit of risk. If you would invest  1,844  in Universal Stainless Alloy on October 9, 2024 and sell it today you would earn a total of  2,556  from holding Universal Stainless Alloy or generate 138.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy70.45%
ValuesDaily Returns

Universal Stainless Alloy  vs.  Renault SA

 Performance 
       Timeline  
Universal Stainless Alloy 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 12 (%) 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.
Renault SA 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Renault SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Renault SA reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Stainless and Renault SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Stainless and Renault SA

The main advantage of trading using opposite Universal Stainless and Renault SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless position performs unexpectedly, Renault SA 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 Renault SA will offset losses from the drop in Renault SA's long position.
The idea behind Universal Stainless Alloy and Renault SA 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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