Correlation Between NN and Universal Power

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

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

Diversification Opportunities for NN and Universal Power

0.24

Correlation Coefficient

NN  Universal Power

Modest diversification

The 3 months correlation between NN and Universal is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding NN Inc and Universal Power Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Power Industry and NN 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 NN Inc are associated (or correlated) with Universal Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Power Industry has no effect on the direction of NN i.e., NN and Universal Power go up and down completely randomly.

Pair Corralation between NN and Universal Power

Given the investment horizon of 90 days NN Inc is expected to under-perform the Universal Power. But the stock apears to be less risky and, when comparing its historical volatility, NN Inc is 3.07 times less risky than Universal Power. The stock trades about -0.01 of its potential returns per unit of risk. The Universal Power Industry is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.35  in Universal Power Industry on March 8, 2025 and sell it today you would earn a total of  0.06  from holding Universal Power Industry or generate 17.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	74.49%
Values	Daily Returns

NN Inc  vs.  Universal Power Industry

NN Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days NN Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in July 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Universal Power Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Power Industry has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Universal Power is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NN and Universal Power

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

The idea behind NN Inc and Universal Power Industry 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.