Correlation Between Aboitiz Power and Universal

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

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

Diversification Opportunities for Aboitiz Power and Universal

0.58

Correlation Coefficient

Aboitiz Power  Universal

Very weak diversification

The 3 months correlation between Aboitiz and Universal is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aboitiz Power and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Aboitiz Power 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 Aboitiz Power 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 Aboitiz Power i.e., Aboitiz Power and Universal go up and down completely randomly.

Pair Corralation between Aboitiz Power and Universal

If you would invest  4,847  in Universal on February 22, 2024 and sell it today you would earn a total of  445.00  from holding Universal or generate 9.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	3.13%
Values	Daily Returns

Aboitiz Power  vs.  Universal

Aboitiz Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aboitiz Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aboitiz Power is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Universal

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Aboitiz Power and Universal

The main advantage of trading using opposite Aboitiz Power and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aboitiz Power 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 Aboitiz Power 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.