Correlation Between Universal Electronics and Xiaomi Corp

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

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

Diversification Opportunities for Universal Electronics and Xiaomi Corp

0.89

Correlation Coefficient

Universal Electronics  Xiaomi Corp

Very poor diversification

The 3 months correlation between Universal and Xiaomi is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and Xiaomi Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiaomi Corp and Universal Electronics 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 Universal Electronics are associated (or correlated) with Xiaomi Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiaomi Corp has no effect on the direction of Universal Electronics i.e., Universal Electronics and Xiaomi Corp go up and down completely randomly.

Pair Corralation between Universal Electronics and Xiaomi Corp

Given the investment horizon of 90 days Universal Electronics is expected to generate 1.6 times more return on investment than Xiaomi Corp. However, Universal Electronics is 1.6 times more volatile than Xiaomi Corp. It trades about 0.15 of its potential returns per unit of risk. Xiaomi Corp is currently generating about 0.15 per unit of risk. If you would invest  999.00  in Universal Electronics on February 2, 2024 and sell it today you would earn a total of  95.00  from holding Universal Electronics or generate 9.51% return on investment over 90 days.

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

Universal Electronics  vs.  Xiaomi Corp

Universal Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting forward indicators, Universal Electronics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Xiaomi Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xiaomi Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Xiaomi Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Electronics and Xiaomi Corp

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

The idea behind Universal Electronics and Xiaomi Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.