Correlation Between Univanich Palm and United Palm

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

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

Diversification Opportunities for Univanich Palm and United Palm

0.74

Correlation Coefficient

Univanich Palm  United Palm

Poor diversification

The 3 months correlation between Univanich and United is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Univanich Palm Oil and United Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Palm Oil and Univanich Palm 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 Univanich Palm Oil are associated (or correlated) with United Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Palm Oil has no effect on the direction of Univanich Palm i.e., Univanich Palm and United Palm go up and down completely randomly.

Pair Corralation between Univanich Palm and United Palm

Assuming the 90 days trading horizon Univanich Palm is expected to generate 1.24 times less return on investment than United Palm. But when comparing it to its historical volatility, Univanich Palm Oil is 1.4 times less risky than United Palm. It trades about 0.03 of its potential returns per unit of risk. United Palm Oil is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  665.00  in United Palm Oil on December 2, 2024 and sell it today you would earn a total of  15.00  from holding United Palm Oil or generate 2.26% return on investment over 90 days.

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

Univanich Palm Oil  vs.  United Palm Oil

Univanich Palm Oil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Univanich Palm Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Univanich Palm is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

United Palm Oil

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Palm Oil are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, United Palm is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Univanich Palm and United Palm

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

The idea behind Univanich Palm Oil and United Palm Oil 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 Commodity Directory module to find actively traded commodities issued by global exchanges.