Correlation Between Unimicron Technology and Elitegroup Computer
Can any of the company-specific risk be diversified away by investing in both Unimicron Technology and Elitegroup Computer 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 Unimicron Technology and Elitegroup Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unimicron Technology Corp and Elitegroup Computer Systems, you can compare the effects of market volatilities on Unimicron Technology and Elitegroup Computer 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 Unimicron Technology with a short position of Elitegroup Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unimicron Technology and Elitegroup Computer.
Diversification Opportunities for Unimicron Technology and Elitegroup Computer
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unimicron and Elitegroup is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Unimicron Technology Corp and Elitegroup Computer Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elitegroup Computer and Unimicron Technology 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 Unimicron Technology Corp are associated (or correlated) with Elitegroup Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elitegroup Computer has no effect on the direction of Unimicron Technology i.e., Unimicron Technology and Elitegroup Computer go up and down completely randomly.
Pair Corralation between Unimicron Technology and Elitegroup Computer
Assuming the 90 days trading horizon Unimicron Technology Corp is expected to under-perform the Elitegroup Computer. But the stock apears to be less risky and, when comparing its historical volatility, Unimicron Technology Corp is 1.08 times less risky than Elitegroup Computer. The stock trades about -0.25 of its potential returns per unit of risk. The Elitegroup Computer Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,165 in Elitegroup Computer Systems on November 4, 2024 and sell it today you would earn a total of 45.00 from holding Elitegroup Computer Systems or generate 2.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unimicron Technology Corp vs. Elitegroup Computer Systems
Performance |
| Timeline |
| Unimicron Technology Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Elitegroup Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Unimicron Technology and Elitegroup Computer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unimicron Technology and Elitegroup Computer
The main advantage of trading using opposite Unimicron Technology and Elitegroup Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unimicron Technology position performs unexpectedly, Elitegroup Computer 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 Elitegroup Computer will offset losses from the drop in Elitegroup Computer's long position.The idea behind Unimicron Technology Corp and Elitegroup Computer Systems 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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