Correlation Between Information Technology and U Media
Can any of the company-specific risk be diversified away by investing in both Information Technology and U Media 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 Information Technology and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Information Technology Total and U Media Communications, you can compare the effects of market volatilities on Information Technology and U Media 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 Information Technology with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and U Media.
Diversification Opportunities for Information Technology and U Media
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Information and 6470 is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and Information Technology 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 Information Technology Total are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Information Technology i.e., Information Technology and U Media go up and down completely randomly.
Pair Corralation between Information Technology and U Media
Assuming the 90 days trading horizon Information Technology Total is expected to generate 1.68 times more return on investment than U Media. However, Information Technology is 1.68 times more volatile than U Media Communications. It trades about 0.02 of its potential returns per unit of risk. U Media Communications is currently generating about -0.22 per unit of risk. If you would invest 4,605 in Information Technology Total on October 21, 2024 and sell it today you would earn a total of 20.00 from holding Information Technology Total or generate 0.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Technology Total vs. U Media Communications
Performance |
| Timeline |
| Information Technology |
| U Media Communications |
Information Technology and U Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Technology and U Media
The main advantage of trading using opposite Information Technology and U Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Technology position performs unexpectedly, U Media 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 U Media will offset losses from the drop in U Media's long position.| Information Technology vs. U Media Communications | Information Technology vs. Chinese Gamer International | Information Technology vs. RiTdisplay Corp | Information Technology vs. Sports Gear Co |
| U Media vs. Intai Technology | U Media vs. China Metal Products | U Media vs. Asmedia Technology | U Media vs. Taiwan Mobile 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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