Correlation Between Darfon Electronics and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both Darfon Electronics and United Microelectronics 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 Darfon Electronics and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Darfon Electronics Corp and United Microelectronics, you can compare the effects of market volatilities on Darfon Electronics and United Microelectronics 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 Darfon Electronics with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Darfon Electronics and United Microelectronics.
Diversification Opportunities for Darfon Electronics and United Microelectronics
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Darfon and United is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Darfon Electronics Corp and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Darfon Electronics 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 Darfon Electronics Corp are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Darfon Electronics i.e., Darfon Electronics and United Microelectronics go up and down completely randomly.
Pair Corralation between Darfon Electronics and United Microelectronics
Assuming the 90 days trading horizon Darfon Electronics Corp is expected to generate 1.09 times more return on investment than United Microelectronics. However, Darfon Electronics is 1.09 times more volatile than United Microelectronics. It trades about 0.04 of its potential returns per unit of risk. United Microelectronics is currently generating about 0.01 per unit of risk. If you would invest 3,850 in Darfon Electronics Corp on August 31, 2024 and sell it today you would earn a total of 1,080 from holding Darfon Electronics Corp or generate 28.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Darfon Electronics Corp vs. United Microelectronics
Performance |
| Timeline |
| Darfon Electronics Corp |
| United Microelectronics |
Darfon Electronics and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Darfon Electronics and United Microelectronics
The main advantage of trading using opposite Darfon Electronics and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Darfon Electronics position performs unexpectedly, United Microelectronics 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 United Microelectronics will offset losses from the drop in United Microelectronics' long position.The idea behind Darfon Electronics Corp and United Microelectronics 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.| United Microelectronics vs. AU Optronics | United Microelectronics vs. Macronix International Co | United Microelectronics vs. Winbond Electronics Corp | United Microelectronics vs. Hon Hai Precision |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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