Correlation Between Utah Medical and United Guardian

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

By analyzing existing cross correlation between Utah Medical Products and United Guardian, you can compare the effects of market volatilities on Utah Medical and United Guardian 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 Utah Medical with a short position of United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utah Medical and United Guardian.

Diversification Opportunities for Utah Medical and United Guardian

0.08

Correlation Coefficient

Utah Medical  United Guardian

Significant diversification

The 3 months correlation between Utah and United is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian and Utah Medical 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 Utah Medical Products are associated (or correlated) with United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Utah Medical i.e., Utah Medical and United Guardian go up and down completely randomly.

Pair Corralation between Utah Medical and United Guardian

Given the investment horizon of 90 days Utah Medical is expected to generate 1.98 times less return on investment than United Guardian. But when comparing it to its historical volatility, Utah Medical Products is 2.99 times less risky than United Guardian. It trades about 0.09 of its potential returns per unit of risk. United Guardian is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,185  in United Guardian on August 10, 2024 and sell it today you would earn a total of  42.00  from holding United Guardian or generate 3.54% return on investment over 90 days.

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

Utah Medical Products  vs.  United Guardian

Utah Medical Products

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Utah Medical Products are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Utah Medical is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

United Guardian

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Guardian are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, United Guardian may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Utah Medical and United Guardian

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

The idea behind Utah Medical Products and United Guardian 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.