Correlation Between United Microelectronics and Pegatron Corp
Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Pegatron Corp 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 Pegatron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Pegatron Corp, you can compare the effects of market volatilities on United Microelectronics and Pegatron Corp 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 Pegatron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Pegatron Corp.
Diversification Opportunities for United Microelectronics and Pegatron Corp
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Pegatron is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Pegatron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pegatron Corp 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 Pegatron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pegatron Corp has no effect on the direction of United Microelectronics i.e., United Microelectronics and Pegatron Corp go up and down completely randomly.
Pair Corralation between United Microelectronics and Pegatron Corp
Assuming the 90 days trading horizon United Microelectronics is expected to under-perform the Pegatron Corp. But the stock apears to be less risky and, when comparing its historical volatility, United Microelectronics is 1.14 times less risky than Pegatron Corp. The stock trades about -0.35 of its potential returns per unit of risk. The Pegatron Corp is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest 10,250 in Pegatron Corp on August 28, 2024 and sell it today you would lose (500.00) from holding Pegatron Corp or give up 4.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Microelectronics vs. Pegatron Corp
Performance |
| Timeline |
| United Microelectronics |
| Pegatron Corp |
United Microelectronics and Pegatron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Microelectronics and Pegatron Corp
The main advantage of trading using opposite United Microelectronics and Pegatron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics position performs unexpectedly, Pegatron Corp 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 Pegatron Corp will offset losses from the drop in Pegatron Corp's long position.The idea behind United Microelectronics and Pegatron Corp 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.| Pegatron Corp vs. Wistron Corp | Pegatron Corp vs. Quanta Computer | Pegatron Corp vs. Compal Electronics | Pegatron Corp vs. Catcher Technology Co |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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