Correlation Between Edgewell Personal and UbiSoft Entertainment

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

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

Diversification Opportunities for Edgewell Personal and UbiSoft Entertainment

0.42

Correlation Coefficient

Edgewell Personal  UbiSoft Entertainment

Very weak diversification

The 3 months correlation between Edgewell and UbiSoft is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and UbiSoft Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UbiSoft Entertainment and Edgewell Personal 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 Edgewell Personal Care are associated (or correlated) with UbiSoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UbiSoft Entertainment has no effect on the direction of Edgewell Personal i.e., Edgewell Personal and UbiSoft Entertainment go up and down completely randomly.

Pair Corralation between Edgewell Personal and UbiSoft Entertainment

Considering the 90-day investment horizon Edgewell Personal Care is expected to under-perform the UbiSoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Edgewell Personal Care is 1.44 times less risky than UbiSoft Entertainment. The stock trades about -0.03 of its potential returns per unit of risk. The UbiSoft Entertainment is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  413.00  in UbiSoft Entertainment on January 29, 2024 and sell it today you would earn a total of  51.00  from holding UbiSoft Entertainment or generate 12.35% return on investment over 90 days.

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

Edgewell Personal Care  vs.  UbiSoft Entertainment

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Edgewell Personal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

UbiSoft Entertainment

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UbiSoft Entertainment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, UbiSoft Entertainment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Edgewell Personal and UbiSoft Entertainment

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

The idea behind Edgewell Personal Care and UbiSoft Entertainment 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.