Correlation Between Universal Microelectronics and Shihlin Electric
Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Shihlin Electric 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 Universal Microelectronics and Shihlin Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Microelectronics Co and Shihlin Electric Engineering, you can compare the effects of market volatilities on Universal Microelectronics and Shihlin Electric 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 Universal Microelectronics with a short position of Shihlin Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Shihlin Electric.
Diversification Opportunities for Universal Microelectronics and Shihlin Electric
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Universal and Shihlin is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Shihlin Electric Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shihlin Electric Eng and Universal 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 Universal Microelectronics Co are associated (or correlated) with Shihlin Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shihlin Electric Eng has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Shihlin Electric go up and down completely randomly.
Pair Corralation between Universal Microelectronics and Shihlin Electric
Assuming the 90 days trading horizon Universal Microelectronics is expected to generate 17.13 times less return on investment than Shihlin Electric. But when comparing it to its historical volatility, Universal Microelectronics Co is 1.32 times less risky than Shihlin Electric. It trades about 0.01 of its potential returns per unit of risk. Shihlin Electric Engineering is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 5,970 in Shihlin Electric Engineering on September 3, 2024 and sell it today you would earn a total of 13,880 from holding Shihlin Electric Engineering or generate 232.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Microelectronics Co vs. Shihlin Electric Engineering
Performance |
| Timeline |
| Universal Microelectronics |
| Shihlin Electric Eng |
Universal Microelectronics and Shihlin Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Microelectronics and Shihlin Electric
The main advantage of trading using opposite Universal Microelectronics and Shihlin Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Microelectronics position performs unexpectedly, Shihlin Electric 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 Shihlin Electric will offset losses from the drop in Shihlin Electric's long position.The idea behind Universal Microelectronics Co and Shihlin Electric Engineering 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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