Correlation Between AVer Information and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both AVer Information 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 AVer Information and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AVer Information and United Microelectronics, you can compare the effects of market volatilities on AVer Information 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 AVer Information with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVer Information and United Microelectronics.
Diversification Opportunities for AVer Information and United Microelectronics
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between AVer and United is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding AVer Information and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and AVer Information 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 AVer Information 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 AVer Information i.e., AVer Information and United Microelectronics go up and down completely randomly.
Pair Corralation between AVer Information and United Microelectronics
Assuming the 90 days trading horizon AVer Information is expected to under-perform the United Microelectronics. In addition to that, AVer Information is 1.1 times more volatile than United Microelectronics. It trades about -0.27 of its total potential returns per unit of risk. United Microelectronics is currently generating about -0.26 per unit of volatility. If you would invest 4,660 in United Microelectronics on September 2, 2024 and sell it today you would lose (305.00) from holding United Microelectronics or give up 6.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
AVer Information vs. United Microelectronics
Performance |
| Timeline |
| AVer Information |
| United Microelectronics |
AVer Information and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AVer Information and United Microelectronics
The main advantage of trading using opposite AVer Information and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AVer Information 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 AVer Information 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.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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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