Correlation Between U Media and China Metal
Can any of the company-specific risk be diversified away by investing in both U Media and China Metal 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 U Media and China Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between U Media Communications and China Metal Products, you can compare the effects of market volatilities on U Media and China Metal 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 U Media with a short position of China Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and China Metal.
Diversification Opportunities for U Media and China Metal
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between 6470 and China is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and China Metal Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Metal Products and U Media 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 U Media Communications are associated (or correlated) with China Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Metal Products has no effect on the direction of U Media i.e., U Media and China Metal go up and down completely randomly.
Pair Corralation between U Media and China Metal
Assuming the 90 days trading horizon U Media Communications is expected to under-perform the China Metal. In addition to that, U Media is 1.09 times more volatile than China Metal Products. It trades about -0.03 of its total potential returns per unit of risk. China Metal Products is currently generating about -0.01 per unit of volatility. If you would invest 3,705 in China Metal Products on September 1, 2024 and sell it today you would lose (340.00) from holding China Metal Products or give up 9.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. China Metal Products
Performance |
| Timeline |
| U Media Communications |
| China Metal Products |
U Media and China Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and China Metal
The main advantage of trading using opposite U Media and China Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, China Metal 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 China Metal will offset losses from the drop in China Metal's long position.| U Media vs. Accton Technology Corp | U Media vs. HTC Corp | U Media vs. Wistron NeWeb Corp | U Media vs. Arcadyan Technology Corp |
| China Metal vs. Basso Industry Corp | China Metal vs. Chung Hsin Electric Machinery | China Metal vs. TYC Brother Industrial | China Metal vs. TECO Electric Machinery |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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