Correlation Between Test Research and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Test Research 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 Test Research and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Test Research and United Microelectronics, you can compare the effects of market volatilities on Test Research 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 Test Research with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Test Research and United Microelectronics.
Diversification Opportunities for Test Research and United Microelectronics
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Test and United is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Test Research and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Test Research 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 Test Research 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 Test Research i.e., Test Research and United Microelectronics go up and down completely randomly.
Pair Corralation between Test Research and United Microelectronics
Assuming the 90 days trading horizon Test Research is expected to generate 2.67 times more return on investment than United Microelectronics. However, Test Research is 2.67 times more volatile than United Microelectronics. It trades about -0.02 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.35 per unit of risk. If you would invest 13,400 in Test Research on September 1, 2024 and sell it today you would lose (400.00) from holding Test Research or give up 2.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Test Research vs. United Microelectronics
Performance |
| Timeline |
| Test Research |
| United Microelectronics |
Test Research and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Test Research and United Microelectronics
The main advantage of trading using opposite Test Research and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Test Research 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.The idea behind Test Research and United Microelectronics 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.| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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