Correlation Between United Microelectronics and Aerospace Industrial
Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Aerospace Industrial 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 Aerospace Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Aerospace Industrial Development, you can compare the effects of market volatilities on United Microelectronics and Aerospace Industrial 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 Aerospace Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Aerospace Industrial.
Diversification Opportunities for United Microelectronics and Aerospace Industrial
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Aerospace is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Aerospace Industrial Developme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerospace 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 Aerospace Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerospace Industrial has no effect on the direction of United Microelectronics i.e., United Microelectronics and Aerospace Industrial go up and down completely randomly.
Pair Corralation between United Microelectronics and Aerospace Industrial
Assuming the 90 days trading horizon United Microelectronics is expected to generate 4.6 times less return on investment than Aerospace Industrial. But when comparing it to its historical volatility, United Microelectronics is 1.23 times less risky than Aerospace Industrial. It trades about 0.01 of its potential returns per unit of risk. Aerospace Industrial Development is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,485 in Aerospace Industrial Development on September 2, 2024 and sell it today you would earn a total of 820.00 from holding Aerospace Industrial Development or generate 23.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Microelectronics vs. Aerospace Industrial Developme
Performance |
| Timeline |
| United Microelectronics |
| Aerospace Industrial |
United Microelectronics and Aerospace Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Microelectronics and Aerospace Industrial
The main advantage of trading using opposite United Microelectronics and Aerospace Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics position performs unexpectedly, Aerospace Industrial 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 Aerospace Industrial will offset losses from the drop in Aerospace Industrial's long position.The idea behind United Microelectronics and Aerospace Industrial Development 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.| Aerospace Industrial vs. CSBC Corp Taiwan | Aerospace Industrial vs. Eva Airways Corp | Aerospace Industrial vs. Taiwan High Speed | Aerospace Industrial vs. China Airlines |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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