Correlation Between United Microelectronics and Gemtek Technology
Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Gemtek Technology 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 Gemtek Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Gemtek Technology Co, you can compare the effects of market volatilities on United Microelectronics and Gemtek Technology 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 Gemtek Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Gemtek Technology.
Diversification Opportunities for United Microelectronics and Gemtek Technology
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Gemtek is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Gemtek Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemtek Technology 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 Gemtek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemtek Technology has no effect on the direction of United Microelectronics i.e., United Microelectronics and Gemtek Technology go up and down completely randomly.
Pair Corralation between United Microelectronics and Gemtek Technology
Assuming the 90 days trading horizon United Microelectronics is expected to under-perform the Gemtek Technology. But the stock apears to be less risky and, when comparing its historical volatility, United Microelectronics is 1.4 times less risky than Gemtek Technology. The stock trades about -0.08 of its potential returns per unit of risk. The Gemtek Technology Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 3,700 in Gemtek Technology Co on August 29, 2024 and sell it today you would lose (120.00) from holding Gemtek Technology Co or give up 3.24% 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. Gemtek Technology Co
Performance |
| Timeline |
| United Microelectronics |
| Gemtek Technology |
United Microelectronics and Gemtek Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Microelectronics and Gemtek Technology
The main advantage of trading using opposite United Microelectronics and Gemtek Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics position performs unexpectedly, Gemtek Technology 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 Gemtek Technology will offset losses from the drop in Gemtek Technology's long position.The idea behind United Microelectronics and Gemtek Technology 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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