Correlation Between Universal Electronics and Zepp Health

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

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

Diversification Opportunities for Universal Electronics and Zepp Health

-0.19

Correlation Coefficient

Universal Electronics  Zepp Health

Good diversification

The 3 months correlation between Universal and Zepp is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and Zepp Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zepp Health 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 Zepp Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zepp Health Corp has no effect on the direction of Universal Electronics i.e., Universal Electronics and Zepp Health go up and down completely randomly.

Pair Corralation between Universal Electronics and Zepp Health

Given the investment horizon of 90 days Universal Electronics is expected to under-perform the Zepp Health. But the stock apears to be less risky and, when comparing its historical volatility, Universal Electronics is 1.17 times less risky than Zepp Health. The stock trades about -0.02 of its potential returns per unit of risk. The Zepp Health Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  484.00  in Zepp Health Corp on August 14, 2024 and sell it today you would lose (154.00) from holding Zepp Health Corp or give up 31.82% of portfolio value over 90 days.

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

Universal Electronics  vs.  Zepp Health Corp

Universal Electronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 6 (%) 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.

Zepp Health Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zepp Health Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Zepp Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Electronics and Zepp Health

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

The idea behind Universal Electronics and Zepp Health 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.