Correlation Between Advantech and Universal Microelectronics
Can any of the company-specific risk be diversified away by investing in both Advantech and Universal 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 Advantech and Universal Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Advantech Co and Universal Microelectronics Co, you can compare the effects of market volatilities on Advantech and Universal 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 Advantech with a short position of Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Universal Microelectronics.
Diversification Opportunities for Advantech and Universal Microelectronics
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Advantech and Universal is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and Advantech 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 Advantech Co are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Advantech i.e., Advantech and Universal Microelectronics go up and down completely randomly.
Pair Corralation between Advantech and Universal Microelectronics
Assuming the 90 days trading horizon Advantech is expected to generate 4.75 times less return on investment than Universal Microelectronics. But when comparing it to its historical volatility, Advantech Co is 3.0 times less risky than Universal Microelectronics. It trades about 0.1 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,110 in Universal Microelectronics Co on September 3, 2024 and sell it today you would earn a total of 530.00 from holding Universal Microelectronics Co or generate 25.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Advantech Co vs. Universal Microelectronics Co
Performance |
| Timeline |
| Advantech |
| Universal Microelectronics |
Advantech and Universal Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Advantech and Universal Microelectronics
The main advantage of trading using opposite Advantech and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advantech position performs unexpectedly, Universal 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 Universal Microelectronics will offset losses from the drop in Universal Microelectronics' long position.| Advantech vs. Taiwan Semiconductor Manufacturing | Advantech vs. Yang Ming Marine | Advantech vs. ASE Industrial Holding | Advantech vs. AU Optronics |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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