Correlation Between Giant Manufacturing and Universal Microelectronics
Can any of the company-specific risk be diversified away by investing in both Giant Manufacturing and Universal 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 Giant Manufacturing and Universal Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Giant Manufacturing Co and Universal Microelectronics Co, you can compare the effects of market volatilities on Giant Manufacturing and Universal 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 Giant Manufacturing with a short position of Universal Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Giant Manufacturing and Universal Microelectronics.
Diversification Opportunities for Giant Manufacturing and Universal Microelectronics
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Giant and Universal is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Giant Manufacturing Co and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and Giant Manufacturing 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 Giant Manufacturing Co are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Giant Manufacturing i.e., Giant Manufacturing and Universal Microelectronics go up and down completely randomly.
Pair Corralation between Giant Manufacturing and Universal Microelectronics
Assuming the 90 days trading horizon Giant Manufacturing Co is expected to under-perform the Universal Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Giant Manufacturing Co is 1.15 times less risky than Universal Microelectronics. The stock trades about -0.08 of its potential returns per unit of risk. The Universal Microelectronics Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,425 in Universal Microelectronics Co on September 3, 2024 and sell it today you would earn a total of 215.00 from holding Universal Microelectronics Co or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Giant Manufacturing Co vs. Universal Microelectronics Co
Performance |
| Timeline |
| Giant Manufacturing |
| Universal Microelectronics |
Giant Manufacturing and Universal Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Giant Manufacturing and Universal Microelectronics
The main advantage of trading using opposite Giant Manufacturing and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Giant Manufacturing position performs unexpectedly, Universal 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 Universal Microelectronics will offset losses from the drop in Universal Microelectronics' long position.| Giant Manufacturing vs. Tainan Spinning Co | Giant Manufacturing vs. Chia Her Industrial | Giant Manufacturing vs. WiseChip Semiconductor | Giant Manufacturing vs. Novatek Microelectronics Corp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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