Correlation Between U Media and Golden Biotechnology
Can any of the company-specific risk be diversified away by investing in both U Media and Golden Biotechnology 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 Golden Biotechnology 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 Golden Biotechnology, you can compare the effects of market volatilities on U Media and Golden Biotechnology 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 Golden Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Golden Biotechnology.
Diversification Opportunities for U Media and Golden Biotechnology
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 6470 and Golden is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology 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 Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of U Media i.e., U Media and Golden Biotechnology go up and down completely randomly.
Pair Corralation between U Media and Golden Biotechnology
Assuming the 90 days trading horizon U Media Communications is expected to under-perform the Golden Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, U Media Communications is 2.57 times less risky than Golden Biotechnology. The stock trades about -0.34 of its potential returns per unit of risk. The Golden Biotechnology is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,505 in Golden Biotechnology on November 3, 2024 and sell it today you would earn a total of 140.00 from holding Golden Biotechnology or generate 9.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. Golden Biotechnology
Performance |
| Timeline |
| U Media Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Golden Biotechnology |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
U Media and Golden Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and Golden Biotechnology
The main advantage of trading using opposite U Media and Golden Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, Golden Biotechnology 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 Golden Biotechnology will offset losses from the drop in Golden Biotechnology's long position.The idea behind U Media Communications and Golden Biotechnology 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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