Correlation Between Danaher and UBEX

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

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

Diversification Opportunities for Danaher and UBEX

-0.27

Correlation Coefficient

Danaher  UBEX

Very good diversification

The 3 months correlation between Danaher and UBEX is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Danaher and UBEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBEX and Danaher 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 Danaher are associated (or correlated) with UBEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBEX has no effect on the direction of Danaher i.e., Danaher and UBEX go up and down completely randomly.

Pair Corralation between Danaher and UBEX

Considering the 90-day investment horizon Danaher is expected to generate 0.55 times more return on investment than UBEX. However, Danaher is 1.81 times less risky than UBEX. It trades about 0.03 of its potential returns per unit of risk. UBEX is currently generating about -0.1 per unit of risk. If you would invest  24,819  in Danaher on January 26, 2024 and sell it today you would earn a total of  222.00  from holding Danaher or generate 0.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Danaher  vs.  UBEX

Danaher

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Danaher are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Danaher may actually be approaching a critical reversion point that can send shares even higher in May 2024.

UBEX

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UBEX are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UBEX exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Danaher and UBEX

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

The idea behind Danaher and UBEX 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.