Correlation Between Applied UV and Energy Focu

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

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

Diversification Opportunities for Applied UV and Energy Focu

-0.45

Correlation Coefficient

Applied UV  Energy Focu

Very good diversification

The 3 months correlation between Applied and Energy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Applied UV Preferred and Energy Focu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Focu and Applied UV 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 Applied UV Preferred are associated (or correlated) with Energy Focu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Focu has no effect on the direction of Applied UV i.e., Applied UV and Energy Focu go up and down completely randomly.

Pair Corralation between Applied UV and Energy Focu

Assuming the 90 days horizon Applied UV Preferred is expected to under-perform the Energy Focu. In addition to that, Applied UV is 2.45 times more volatile than Energy Focu. It trades about -0.02 of its total potential returns per unit of risk. Energy Focu is currently generating about 0.02 per unit of volatility. If you would invest  217.00  in Energy Focu on September 14, 2024 and sell it today you would lose (76.00) from holding Energy Focu or give up 35.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	81.17%
Values	Daily Returns

Applied UV Preferred  vs.  Energy Focu

Applied UV Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied UV Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Applied UV is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Energy Focu

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Focu are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Energy Focu may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Applied UV and Energy Focu

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

The idea behind Applied UV Preferred and Energy Focu 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.