Correlation Between Universal Technical and Leef Brands

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

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

Diversification Opportunities for Universal Technical and Leef Brands

0.04

Correlation Coefficient

Universal Technical  Leef Brands

Significant diversification

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

Pair Corralation between Universal Technical and Leef Brands

Considering the 90-day investment horizon Universal Technical is expected to generate 1.95 times less return on investment than Leef Brands. But when comparing it to its historical volatility, Universal Technical Institute is 4.89 times less risky than Leef Brands. It trades about 0.14 of its potential returns per unit of risk. Leef Brands is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Leef Brands on August 31, 2024 and sell it today you would lose (5.00) from holding Leef Brands or give up 26.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.73%
Values	Daily Returns

Universal Technical Institute  vs.  Leef Brands

Universal Technical

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Universal Technical demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Leef Brands

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Universal Technical and Leef Brands

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

The idea behind Universal Technical Institute and Leef Brands 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.