Correlation Between Kings Town and Universal Microelectronics
Can any of the company-specific risk be diversified away by investing in both Kings Town and Universal 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 Kings Town and Universal Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kings Town Bank and Universal Microelectronics Co, you can compare the effects of market volatilities on Kings Town and Universal 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 Kings Town with a short position of Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kings Town and Universal Microelectronics.
Diversification Opportunities for Kings Town and Universal Microelectronics
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kings and Universal is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Kings Town Bank and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and Kings Town 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 Kings Town Bank are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Kings Town i.e., Kings Town and Universal Microelectronics go up and down completely randomly.
Pair Corralation between Kings Town and Universal Microelectronics
Assuming the 90 days trading horizon Kings Town Bank is expected to generate 0.4 times more return on investment than Universal Microelectronics. However, Kings Town Bank is 2.52 times less risky than Universal Microelectronics. It trades about -0.13 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about -0.16 per unit of risk. If you would invest 5,140 in Kings Town Bank on November 7, 2024 and sell it today you would lose (110.00) from holding Kings Town Bank or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kings Town Bank vs. Universal Microelectronics Co
Performance |
| Timeline |
| Kings Town Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| Universal Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Kings Town and Universal Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kings Town and Universal Microelectronics
The main advantage of trading using opposite Kings Town and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kings Town position performs unexpectedly, Universal 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 Universal Microelectronics will offset losses from the drop in Universal Microelectronics' long position.The idea behind Kings Town Bank and Universal Microelectronics Co 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.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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