Correlation Between Universal Security and CoreCivic

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

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

Diversification Opportunities for Universal Security and CoreCivic

0.85

Correlation Coefficient

Universal Security  CoreCivic

Very poor diversification

The 3 months correlation between Universal and CoreCivic is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Universal Security Instruments and CoreCivic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoreCivic and Universal Security 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 Security Instruments are associated (or correlated) with CoreCivic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoreCivic has no effect on the direction of Universal Security i.e., Universal Security and CoreCivic go up and down completely randomly.

Pair Corralation between Universal Security and CoreCivic

Considering the 90-day investment horizon Universal Security is expected to generate 4.6 times less return on investment than CoreCivic. But when comparing it to its historical volatility, Universal Security Instruments is 2.83 times less risky than CoreCivic. It trades about 0.13 of its potential returns per unit of risk. CoreCivic is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,363  in CoreCivic on October 6, 2024 and sell it today you would earn a total of  859.00  from holding CoreCivic or generate 63.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	97.62%
Values	Daily Returns

Universal Security Instruments  vs.  CoreCivic

Universal Security

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Security Instruments are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Universal Security unveiled solid returns over the last few months and may actually be approaching a breakup point.

CoreCivic

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CoreCivic are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CoreCivic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Security and CoreCivic

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

The idea behind Universal Security Instruments and CoreCivic 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.