Correlation Between United Palm and Univanich Palm

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

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

Diversification Opportunities for United Palm and Univanich Palm

-0.01

Correlation Coefficient

United Palm  Univanich Palm

Good diversification

The 3 months correlation between United and Univanich is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding United Palm Oil and Univanich Palm Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univanich Palm Oil and United Palm 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 United Palm Oil are associated (or correlated) with Univanich Palm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univanich Palm Oil has no effect on the direction of United Palm i.e., United Palm and Univanich Palm go up and down completely randomly.

Pair Corralation between United Palm and Univanich Palm

Assuming the 90 days trading horizon United Palm Oil is expected to generate 1.08 times more return on investment than Univanich Palm. However, United Palm is 1.08 times more volatile than Univanich Palm Oil. It trades about 0.11 of its potential returns per unit of risk. Univanich Palm Oil is currently generating about -0.01 per unit of risk. If you would invest  602.00  in United Palm Oil on March 4, 2024 and sell it today you would earn a total of  53.00  from holding United Palm Oil or generate 8.8% return on investment over 90 days.

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

United Palm Oil  vs.  Univanich Palm Oil

United Palm Oil

Risk-Adjusted Performance

8 of 100

OK

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

Univanich Palm Oil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Univanich Palm Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Univanich Palm is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with United Palm and Univanich Palm

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

The idea behind United Palm Oil and Univanich Palm Oil 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.