Correlation Between TE Connectivity and Ubiquiti Networks

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

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

Diversification Opportunities for TE Connectivity and Ubiquiti Networks

0.58

Correlation Coefficient

TE Connectivity  Ubiquiti Networks

Very weak diversification

The 3 months correlation between TEL and Ubiquiti is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding TE Connectivity and Ubiquiti Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubiquiti Networks and TE Connectivity 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 TE Connectivity are associated (or correlated) with Ubiquiti Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubiquiti Networks has no effect on the direction of TE Connectivity i.e., TE Connectivity and Ubiquiti Networks go up and down completely randomly.

Pair Corralation between TE Connectivity and Ubiquiti Networks

Considering the 90-day investment horizon TE Connectivity is expected to generate 0.62 times more return on investment than Ubiquiti Networks. However, TE Connectivity is 1.63 times less risky than Ubiquiti Networks. It trades about 0.03 of its potential returns per unit of risk. Ubiquiti Networks is currently generating about -0.03 per unit of risk. If you would invest  12,546  in TE Connectivity on February 17, 2024 and sell it today you would earn a total of  2,533  from holding TE Connectivity or generate 20.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

TE Connectivity  vs.  Ubiquiti Networks

TE Connectivity

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TE Connectivity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, TE Connectivity may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Ubiquiti Networks

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ubiquiti Networks are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating forward indicators, Ubiquiti Networks demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TE Connectivity and Ubiquiti Networks

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

The idea behind TE Connectivity and Ubiquiti Networks 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.