Correlation Between U Media and Chunghwa Precision
Can any of the company-specific risk be diversified away by investing in both U Media and Chunghwa Precision 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 Chunghwa Precision 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 Chunghwa Precision Test, you can compare the effects of market volatilities on U Media and Chunghwa Precision 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 Chunghwa Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Chunghwa Precision.
Diversification Opportunities for U Media and Chunghwa Precision
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 6470 and Chunghwa is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Chunghwa Precision Test in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chunghwa Precision Test 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 Chunghwa Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chunghwa Precision Test has no effect on the direction of U Media i.e., U Media and Chunghwa Precision go up and down completely randomly.
Pair Corralation between U Media and Chunghwa Precision
Assuming the 90 days trading horizon U Media Communications is expected to under-perform the Chunghwa Precision. But the stock apears to be less risky and, when comparing its historical volatility, U Media Communications is 1.1 times less risky than Chunghwa Precision. The stock trades about -0.27 of its potential returns per unit of risk. The Chunghwa Precision Test is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 69,500 in Chunghwa Precision Test on January 11, 2025 and sell it today you would lose (15,800) from holding Chunghwa Precision Test or give up 22.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
U Media Communications vs. Chunghwa Precision Test
Performance |
| Timeline |
| U Media Communications |
| Chunghwa Precision Test |
U Media and Chunghwa Precision Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with U Media and Chunghwa Precision
The main advantage of trading using opposite U Media and Chunghwa Precision positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if U Media position performs unexpectedly, Chunghwa Precision 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 Chunghwa Precision will offset losses from the drop in Chunghwa Precision's long position.| U Media vs. U Ming Marine Transport | U Media vs. Sporton International | U Media vs. HOYA Resort Hotel | U Media vs. Quintain Steel Co |
| Chunghwa Precision vs. Shian Yih Electronic | Chunghwa Precision vs. Chander Electronics Corp | Chunghwa Precision vs. Harmony Electronics | Chunghwa Precision vs. Dadi Early Childhood Education |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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