Correlation Between U Ming and TWOWAY Communications

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Can any of the company-specific risk be diversified away by investing in both U Ming and TWOWAY Communications 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 U Ming and TWOWAY Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Ming Marine Transport and TWOWAY Communications, you can compare the effects of market volatilities on U Ming and TWOWAY Communications 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 U Ming with a short position of TWOWAY Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and TWOWAY Communications.

Diversification Opportunities for U Ming and TWOWAY Communications

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between 2606 and TWOWAY is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and TWOWAY Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TWOWAY Communications and U Ming 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 U Ming Marine Transport are associated (or correlated) with TWOWAY Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TWOWAY Communications has no effect on the direction of U Ming i.e., U Ming and TWOWAY Communications go up and down completely randomly.

Pair Corralation between U Ming and TWOWAY Communications

Assuming the 90 days trading horizon U Ming is expected to generate 92.11 times less return on investment than TWOWAY Communications. But when comparing it to its historical volatility, U Ming Marine Transport is 1.93 times less risky than TWOWAY Communications. It trades about 0.01 of its potential returns per unit of risk. TWOWAY Communications is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  9,510  in TWOWAY Communications on November 5, 2024 and sell it today you would earn a total of  2,190  from holding TWOWAY Communications or generate 23.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

U Ming Marine Transport  vs.  TWOWAY Communications

 Performance 
       Timeline  
U Ming Marine 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Weak
Over the last 90 days U Ming Marine Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, U Ming is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
TWOWAY Communications 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Modest
Over the last 90 days TWOWAY Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, TWOWAY Communications showed solid returns over the last few months and may actually be approaching a breakup point.

U Ming and TWOWAY Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with U Ming and TWOWAY Communications

The main advantage of trading using opposite U Ming and TWOWAY Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Ming position performs unexpectedly, TWOWAY Communications 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 TWOWAY Communications will offset losses from the drop in TWOWAY Communications' long position.
The idea behind U Ming Marine Transport and TWOWAY Communications 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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