Correlation Between Global Unichip and EMemory Technology
Can any of the company-specific risk be diversified away by investing in both Global Unichip and EMemory Technology 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 Global Unichip and EMemory Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Unichip Corp and eMemory Technology, you can compare the effects of market volatilities on Global Unichip and EMemory Technology 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 Global Unichip with a short position of EMemory Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Unichip and EMemory Technology.
Diversification Opportunities for Global Unichip and EMemory Technology
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and EMemory is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Global Unichip Corp and eMemory Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMemory Technology and Global Unichip 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 Global Unichip Corp are associated (or correlated) with EMemory Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMemory Technology has no effect on the direction of Global Unichip i.e., Global Unichip and EMemory Technology go up and down completely randomly.
Pair Corralation between Global Unichip and EMemory Technology
Assuming the 90 days trading horizon Global Unichip Corp is expected to under-perform the EMemory Technology. But the stock apears to be less risky and, when comparing its historical volatility, Global Unichip Corp is 1.05 times less risky than EMemory Technology. The stock trades about -0.02 of its potential returns per unit of risk. The eMemory Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 253,257 in eMemory Technology on November 5, 2024 and sell it today you would earn a total of 84,743 from holding eMemory Technology or generate 33.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Unichip Corp vs. eMemory Technology
Performance |
| Timeline |
| Global Unichip Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
| eMemory Technology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Global Unichip and EMemory Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Unichip and EMemory Technology
The main advantage of trading using opposite Global Unichip and EMemory Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Unichip position performs unexpectedly, EMemory Technology 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 EMemory Technology will offset losses from the drop in EMemory Technology's long position.The idea behind Global Unichip Corp and eMemory Technology 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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