Correlation Between U Media and Wonderful
Can any of the company-specific risk be diversified away by investing in both U Media and Wonderful 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 Wonderful 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 Wonderful Hi Tech Co, you can compare the effects of market volatilities on U Media and Wonderful 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 Wonderful. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Wonderful.
Diversification Opportunities for U Media and Wonderful
Very weak diversification
The 3 months correlation between 6470 and Wonderful is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Wonderful Hi Tech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wonderful Hi Tech 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 Wonderful. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wonderful Hi Tech has no effect on the direction of U Media i.e., U Media and Wonderful go up and down completely randomly.
Pair Corralation between U Media and Wonderful
Assuming the 90 days trading horizon U Media is expected to generate 1.17 times less return on investment than Wonderful. In addition to that, U Media is 1.15 times more volatile than Wonderful Hi Tech Co. It trades about 0.03 of its total potential returns per unit of risk. Wonderful Hi Tech Co is currently generating about 0.04 per unit of volatility. If you would invest 3,240 in Wonderful Hi Tech Co on November 3, 2024 and sell it today you would earn a total of 250.00 from holding Wonderful Hi Tech Co or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. Wonderful Hi Tech Co
Performance |
| Timeline |
| U Media Communications |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Wonderful Hi Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
U Media and Wonderful Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and Wonderful
The main advantage of trading using opposite U Media and Wonderful positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, Wonderful 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 Wonderful will offset losses from the drop in Wonderful's long position.The idea behind U Media Communications and Wonderful Hi Tech Co 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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