Correlation Between U Media and New Asia
Can any of the company-specific risk be diversified away by investing in both U Media and New Asia 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 New Asia 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 New Asia Construction, you can compare the effects of market volatilities on U Media and New Asia 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 New Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and New Asia.
Diversification Opportunities for U Media and New Asia
Average diversification
The 3 months correlation between 6470 and New is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and New Asia Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Asia Construction 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 New Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Asia Construction has no effect on the direction of U Media i.e., U Media and New Asia go up and down completely randomly.
Pair Corralation between U Media and New Asia
Assuming the 90 days trading horizon U Media is expected to generate 4.37 times less return on investment than New Asia. But when comparing it to its historical volatility, U Media Communications is 1.26 times less risky than New Asia. It trades about 0.03 of its potential returns per unit of risk. New Asia Construction is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 499.00 in New Asia Construction on September 12, 2024 and sell it today you would earn a total of 806.00 from holding New Asia Construction or generate 161.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. New Asia Construction
Performance |
| Timeline |
| U Media Communications |
| New Asia Construction |
U Media and New Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and New Asia
The main advantage of trading using opposite U Media and New Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, New Asia 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 New Asia will offset losses from the drop in New Asia's long position.| U Media vs. Gemtek Technology Co | U Media vs. Ruentex Development Co | U Media vs. WiseChip Semiconductor | U Media vs. Novatek Microelectronics Corp |
| New Asia vs. Yang Ming Marine | New Asia vs. Wan Hai Lines | New Asia vs. U Ming Marine Transport | New Asia vs. Taiwan Navigation Co |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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