Correlation Between CMC Magnetics and Unimicron Technology
Can any of the company-specific risk be diversified away by investing in both CMC Magnetics and Unimicron 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 CMC Magnetics and Unimicron Technology 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 Unimicron Technology Corp, you can compare the effects of market volatilities on CMC Magnetics and Unimicron 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 CMC Magnetics with a short position of Unimicron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMC Magnetics and Unimicron Technology.
Diversification Opportunities for CMC Magnetics and Unimicron Technology
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CMC and Unimicron is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CMC Magnetics Corp and Unimicron Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unimicron Technology Corp 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 Unimicron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unimicron Technology Corp has no effect on the direction of CMC Magnetics i.e., CMC Magnetics and Unimicron Technology go up and down completely randomly.
Pair Corralation between CMC Magnetics and Unimicron Technology
Assuming the 90 days trading horizon CMC Magnetics Corp is expected to generate 1.07 times more return on investment than Unimicron Technology. However, CMC Magnetics is 1.07 times more volatile than Unimicron Technology Corp. It trades about -0.1 of its potential returns per unit of risk. Unimicron Technology Corp is currently generating about -0.25 per unit of risk. If you would invest 1,010 in CMC Magnetics Corp on November 4, 2024 and sell it today you would lose (31.00) from holding CMC Magnetics Corp or give up 3.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMC Magnetics Corp vs. Unimicron Technology Corp
Performance |
| Timeline |
| CMC Magnetics Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Unimicron Technology Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
CMC Magnetics and Unimicron Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMC Magnetics and Unimicron Technology
The main advantage of trading using opposite CMC Magnetics and Unimicron Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMC Magnetics position performs unexpectedly, Unimicron 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 Unimicron Technology will offset losses from the drop in Unimicron Technology's long position.The idea behind CMC Magnetics Corp and Unimicron Technology 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.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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