Correlation Between Universal and Real Good

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

By analyzing existing cross correlation between Universal and Real Good Food, you can compare the effects of market volatilities on Universal and Real Good 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 Real Good. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal and Real Good.

Diversification Opportunities for Universal and Real Good

-0.39

Correlation Coefficient

Universal  Real Good

Very good diversification

The 3 months correlation between Universal and Real is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Real Good Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Good Food 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 Real Good. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Good Food has no effect on the direction of Universal i.e., Universal and Real Good go up and down completely randomly.

Pair Corralation between Universal and Real Good

Considering the 90-day investment horizon Universal is expected to generate 210.22 times less return on investment than Real Good. But when comparing it to its historical volatility, Universal is 106.71 times less risky than Real Good. It trades about 0.07 of its potential returns per unit of risk. Real Good Food is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  309.00  in Real Good Food on December 27, 2024 and sell it today you would lose (295.00) from holding Real Good Food or give up 95.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	21.31%
Values	Daily Returns

Universal  vs.  Real Good Food

Universal

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Real Good Food

Risk-Adjusted Performance

OK

Over the last 90 days Real Good Food has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical and fundamental indicators, Real Good reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal and Real Good

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

The idea behind Universal and Real Good Food 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.