Correlation Between Vector and Universal

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

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

Diversification Opportunities for Vector and Universal

-0.42

Correlation Coefficient

Vector  Universal

Very good diversification

The 3 months correlation between Vector and Universal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Vector Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Vector 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 Vector Group are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Vector i.e., Vector and Universal go up and down completely randomly.

Pair Corralation between Vector and Universal

Considering the 90-day investment horizon Vector is expected to generate 2.33 times less return on investment than Universal. In addition to that, Vector is 1.32 times more volatile than Universal. It trades about 0.0 of its total potential returns per unit of risk. Universal is currently generating about 0.01 per unit of volatility. If you would invest  5,435  in Universal on February 5, 2024 and sell it today you would lose (96.00) from holding Universal or give up 1.77% of portfolio value over 90 days.

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

Vector Group  vs.  Universal

Vector Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vector Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Vector is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Vector and Universal

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

The idea behind Vector Group and Universal 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.