Correlation Between Universal Microelectronics and Evergreen Marine
Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Evergreen Marine 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 Evergreen Marine 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 Evergreen Marine Corp, you can compare the effects of market volatilities on Universal Microelectronics and Evergreen Marine 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 Evergreen Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Evergreen Marine.
Diversification Opportunities for Universal Microelectronics and Evergreen Marine
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Universal and Evergreen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Evergreen Marine Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evergreen Marine Corp 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 Evergreen Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evergreen Marine Corp has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Evergreen Marine go up and down completely randomly.
Pair Corralation between Universal Microelectronics and Evergreen Marine
Assuming the 90 days trading horizon Universal Microelectronics is expected to generate 17.62 times less return on investment than Evergreen Marine. In addition to that, Universal Microelectronics is 1.02 times more volatile than Evergreen Marine Corp. It trades about 0.01 of its total potential returns per unit of risk. Evergreen Marine Corp is currently generating about 0.09 per unit of volatility. If you would invest 8,610 in Evergreen Marine Corp on September 5, 2024 and sell it today you would earn a total of 14,290 from holding Evergreen Marine Corp or generate 165.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Microelectronics Co vs. Evergreen Marine Corp
Performance |
| Timeline |
| Universal Microelectronics |
| Evergreen Marine Corp |
Universal Microelectronics and Evergreen Marine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Microelectronics and Evergreen Marine
The main advantage of trading using opposite Universal Microelectronics and Evergreen Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Microelectronics position performs unexpectedly, Evergreen Marine 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 Evergreen Marine will offset losses from the drop in Evergreen Marine's long position.The idea behind Universal Microelectronics Co and Evergreen Marine 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.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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