Correlation Between Universal Microelectronics and Chien Kuo
Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Chien Kuo 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 Chien Kuo 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 Chien Kuo Construction, you can compare the effects of market volatilities on Universal Microelectronics and Chien Kuo 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 Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Chien Kuo.
Diversification Opportunities for Universal Microelectronics and Chien Kuo
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Universal and Chien is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo Construction 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 Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Chien Kuo go up and down completely randomly.
Pair Corralation between Universal Microelectronics and Chien Kuo
Assuming the 90 days trading horizon Universal Microelectronics is expected to generate 11.19 times less return on investment than Chien Kuo. But when comparing it to its historical volatility, Universal Microelectronics Co is 1.15 times less risky than Chien Kuo. It trades about 0.01 of its potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,385 in Chien Kuo Construction on September 4, 2024 and sell it today you would earn a total of 1,465 from holding Chien Kuo Construction or generate 105.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Universal Microelectronics Co vs. Chien Kuo Construction
Performance |
| Timeline |
| Universal Microelectronics |
| Chien Kuo Construction |
Universal Microelectronics and Chien Kuo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Microelectronics and Chien Kuo
The main advantage of trading using opposite Universal Microelectronics and Chien Kuo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Microelectronics position performs unexpectedly, Chien Kuo 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 Chien Kuo will offset losses from the drop in Chien Kuo's long position.The idea behind Universal Microelectronics Co and Chien Kuo Construction 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.
| Chien Kuo vs. Universal Microelectronics Co | Chien Kuo vs. AVerMedia Technologies | Chien Kuo vs. Symtek Automation Asia | Chien Kuo vs. WiseChip Semiconductor |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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