Correlation Between Universal and Flexible Solutions

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

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

Diversification Opportunities for Universal and Flexible Solutions

0.26

Correlation Coefficient

Universal  Flexible Solutions

Modest diversification

The 3 months correlation between Universal and Flexible is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Flexible Solutions Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flexible Solutions and Universal 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 are associated (or correlated) with Flexible Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flexible Solutions has no effect on the direction of Universal i.e., Universal and Flexible Solutions go up and down completely randomly.

Pair Corralation between Universal and Flexible Solutions

Considering the 90-day investment horizon Universal is expected to under-perform the Flexible Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Universal is 1.86 times less risky than Flexible Solutions. The stock trades about -0.22 of its potential returns per unit of risk. The Flexible Solutions International is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  382.00  in Flexible Solutions International on October 6, 2024 and sell it today you would lose (15.00) from holding Flexible Solutions International or give up 3.93% of portfolio value over 90 days.

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

Universal  vs.  Flexible Solutions Internation

Universal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Flexible Solutions

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Flexible Solutions International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Flexible Solutions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Universal and Flexible Solutions

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

The idea behind Universal and Flexible Solutions International 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.