Correlation Between Universal Technical and Stratasys

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

Diversification Opportunities for Universal Technical and Stratasys

0.88

Correlation Coefficient

Universal Technical  Stratasys

Very poor diversification

The 3 months correlation between Universal and Stratasys is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Universal Technical Institute and Stratasys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stratasys 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 Stratasys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stratasys has no effect on the direction of Universal Technical i.e., Universal Technical and Stratasys go up and down completely randomly.

Pair Corralation between Universal Technical and Stratasys

Considering the 90-day investment horizon Universal Technical Institute is expected to generate 0.79 times more return on investment than Stratasys. However, Universal Technical Institute is 1.26 times less risky than Stratasys. It trades about 0.22 of its potential returns per unit of risk. Stratasys is currently generating about 0.08 per unit of risk. If you would invest  1,903  in Universal Technical Institute on October 7, 2024 and sell it today you would earn a total of  717.00  from holding Universal Technical Institute or generate 37.68% return on investment over 90 days.

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

Universal Technical Institute  vs.  Stratasys

Universal Technical

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Technical Institute are ranked lower than 20 (%) 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.

Stratasys

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Universal Technical and Stratasys

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

The idea behind Universal Technical Institute and Stratasys 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.