Correlation Between Thinking Electronic and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Thinking Electronic and United 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 Thinking Electronic and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thinking Electronic Industrial and United Microelectronics, you can compare the effects of market volatilities on Thinking Electronic and United 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 Thinking Electronic with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thinking Electronic and United Microelectronics.
Diversification Opportunities for Thinking Electronic and United Microelectronics
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Thinking and United is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Thinking Electronic Industrial and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Thinking Electronic 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 Thinking Electronic Industrial are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Thinking Electronic i.e., Thinking Electronic and United Microelectronics go up and down completely randomly.
Pair Corralation between Thinking Electronic and United Microelectronics
Assuming the 90 days trading horizon Thinking Electronic Industrial is expected to generate 0.88 times more return on investment than United Microelectronics. However, Thinking Electronic Industrial is 1.13 times less risky than United Microelectronics. It trades about -0.22 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.32 per unit of risk. If you would invest 16,400 in Thinking Electronic Industrial on August 31, 2024 and sell it today you would lose (900.00) from holding Thinking Electronic Industrial or give up 5.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thinking Electronic Industrial vs. United Microelectronics
Performance |
| Timeline |
| Thinking Electronic |
| United Microelectronics |
Thinking Electronic and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thinking Electronic and United Microelectronics
The main advantage of trading using opposite Thinking Electronic and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thinking Electronic position performs unexpectedly, United 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 United Microelectronics will offset losses from the drop in United Microelectronics' long position.| Thinking Electronic vs. United Microelectronics | Thinking Electronic vs. Winbond Electronics Corp | Thinking Electronic vs. Macronix International Co |
| United Microelectronics vs. AU Optronics | United Microelectronics vs. Macronix International Co | United Microelectronics vs. Winbond Electronics Corp | United Microelectronics vs. Hon Hai Precision |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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