Correlation Between CMC Magnetics and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both CMC Magnetics and United 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 CMC Magnetics and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMC Magnetics Corp and United Microelectronics, you can compare the effects of market volatilities on CMC Magnetics and United 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 CMC Magnetics with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Magnetics and United Microelectronics.
Diversification Opportunities for CMC Magnetics and United Microelectronics
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CMC and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CMC Magnetics Corp and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and CMC Magnetics 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 CMC Magnetics Corp are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of CMC Magnetics i.e., CMC Magnetics and United Microelectronics go up and down completely randomly.
Pair Corralation between CMC Magnetics and United Microelectronics
Assuming the 90 days trading horizon CMC Magnetics is expected to generate 1.75 times less return on investment than United Microelectronics. In addition to that, CMC Magnetics is 1.52 times more volatile than United Microelectronics. It trades about 0.17 of its total potential returns per unit of risk. United Microelectronics is currently generating about 0.44 per unit of volatility. If you would invest 4,050 in United Microelectronics on November 27, 2024 and sell it today you would earn a total of 305.00 from holding United Microelectronics or generate 7.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMC Magnetics Corp vs. United Microelectronics
Performance |
| Timeline |
| CMC Magnetics Corp |
| United Microelectronics |
CMC Magnetics and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Magnetics and United Microelectronics
The main advantage of trading using opposite CMC Magnetics and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Magnetics position performs unexpectedly, United 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 United Microelectronics will offset losses from the drop in United Microelectronics' long position.| CMC Magnetics vs. Ritek Corp | CMC Magnetics vs. Macronix International Co | CMC Magnetics vs. Winbond Electronics Corp | CMC Magnetics vs. Compal Electronics |
| United Microelectronics vs. AU Optronics | United Microelectronics vs. Macronix International Co | United Microelectronics vs. Winbond Electronics Corp | United Microelectronics vs. Hon Hai Precision |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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