Correlation Between Uni President and SohuCom

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

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

Diversification Opportunities for Uni President and SohuCom

0.71

Correlation Coefficient

Uni President  SohuCom

Poor diversification

The 3 months correlation between Uni and SohuCom is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Uni President China Holdings and SohuCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SohuCom and Uni President 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 Uni President China Holdings are associated (or correlated) with SohuCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SohuCom has no effect on the direction of Uni President i.e., Uni President and SohuCom go up and down completely randomly.

Pair Corralation between Uni President and SohuCom

Assuming the 90 days horizon Uni President China Holdings is expected to under-perform the SohuCom. But the pink sheet apears to be less risky and, when comparing its historical volatility, Uni President China Holdings is 17.62 times less risky than SohuCom. The pink sheet trades about -0.22 of its potential returns per unit of risk. The SohuCom is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,048  in SohuCom on January 26, 2024 and sell it today you would earn a total of  75.00  from holding SohuCom or generate 7.16% return on investment over 90 days.

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

Uni President China Holdings  vs.  SohuCom

Uni President China

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uni President China Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Uni President showed solid returns over the last few months and may actually be approaching a breakup point.

SohuCom

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SohuCom are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, SohuCom unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Uni President and SohuCom

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

The idea behind Uni President China Holdings and SohuCom 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.