Correlation Between Chi Hua and Universal Microelectronics

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Can any of the company-specific risk be diversified away by investing in both Chi Hua and Universal Microelectronics 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 Chi Hua and Universal Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chi Hua Fitness and Universal Microelectronics Co, you can compare the effects of market volatilities on Chi Hua and Universal Microelectronics 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 Chi Hua with a short position of Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chi Hua and Universal Microelectronics.

Diversification Opportunities for Chi Hua and Universal Microelectronics

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Chi and Universal is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Chi Hua Fitness and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and Chi Hua 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 Chi Hua Fitness are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Chi Hua i.e., Chi Hua and Universal Microelectronics go up and down completely randomly.

Pair Corralation between Chi Hua and Universal Microelectronics

Assuming the 90 days trading horizon Chi Hua Fitness is expected to generate 0.3 times more return on investment than Universal Microelectronics. However, Chi Hua Fitness is 3.31 times less risky than Universal Microelectronics. It trades about 0.07 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about -0.08 per unit of risk. If you would invest  3,710  in Chi Hua Fitness on September 15, 2024 and sell it today you would earn a total of  55.00  from holding Chi Hua Fitness or generate 1.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chi Hua Fitness  vs.  Universal Microelectronics Co

 Performance 
       Timeline  
Chi Hua Fitness 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chi Hua Fitness has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.
Universal Microelectronics 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Chi Hua and Universal Microelectronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chi Hua and Universal Microelectronics

The main advantage of trading using opposite Chi Hua and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chi Hua position performs unexpectedly, Universal Microelectronics 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 Microelectronics will offset losses from the drop in Universal Microelectronics' long position.
The idea behind Chi Hua Fitness and Universal Microelectronics Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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