Correlation Between United Microelectronics and Chin Poon
Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Chin Poon 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 United Microelectronics and Chin Poon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Chin Poon Industrial Co, you can compare the effects of market volatilities on United Microelectronics and Chin Poon 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 United Microelectronics with a short position of Chin Poon. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Chin Poon.
Diversification Opportunities for United Microelectronics and Chin Poon
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Chin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Chin Poon Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chin Poon Industrial and United Microelectronics 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 United Microelectronics are associated (or correlated) with Chin Poon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chin Poon Industrial has no effect on the direction of United Microelectronics i.e., United Microelectronics and Chin Poon go up and down completely randomly.
Pair Corralation between United Microelectronics and Chin Poon
Assuming the 90 days trading horizon United Microelectronics is expected to under-perform the Chin Poon. But the stock apears to be less risky and, when comparing its historical volatility, United Microelectronics is 1.26 times less risky than Chin Poon. The stock trades about -0.31 of its potential returns per unit of risk. The Chin Poon Industrial Co is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 4,260 in Chin Poon Industrial Co on September 2, 2024 and sell it today you would lose (435.00) from holding Chin Poon Industrial Co or give up 10.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Microelectronics vs. Chin Poon Industrial Co
Performance |
| Timeline |
| United Microelectronics |
| Chin Poon Industrial |
United Microelectronics and Chin Poon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Microelectronics and Chin Poon
The main advantage of trading using opposite United Microelectronics and Chin Poon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics position performs unexpectedly, Chin Poon 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 Chin Poon will offset losses from the drop in Chin Poon's long position.The idea behind United Microelectronics and Chin Poon Industrial 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.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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