Correlation Between APPLIED MATERIALS and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both APPLIED MATERIALS and UMC Electronics 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 APPLIED MATERIALS and UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between APPLIED MATERIALS and UMC Electronics Co, you can compare the effects of market volatilities on APPLIED MATERIALS and UMC Electronics 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 APPLIED MATERIALS with a short position of UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of APPLIED MATERIALS and UMC Electronics.
Diversification Opportunities for APPLIED MATERIALS and UMC Electronics
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between APPLIED and UMC is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding APPLIED MATERIALS and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and APPLIED MATERIALS 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 APPLIED MATERIALS are associated (or correlated) with UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of APPLIED MATERIALS i.e., APPLIED MATERIALS and UMC Electronics go up and down completely randomly.
Pair Corralation between APPLIED MATERIALS and UMC Electronics
Assuming the 90 days trading horizon APPLIED MATERIALS is expected to generate 1.26 times more return on investment than UMC Electronics. However, APPLIED MATERIALS is 1.26 times more volatile than UMC Electronics Co. It trades about -0.09 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.15 per unit of risk. If you would invest 17,413 in APPLIED MATERIALS on August 29, 2024 and sell it today you would lose (1,051) from holding APPLIED MATERIALS or give up 6.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
APPLIED MATERIALS vs. UMC Electronics Co
Performance |
| Timeline |
| APPLIED MATERIALS |
| UMC Electronics |
APPLIED MATERIALS and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with APPLIED MATERIALS and UMC Electronics
The main advantage of trading using opposite APPLIED MATERIALS and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if APPLIED MATERIALS position performs unexpectedly, UMC Electronics 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 UMC Electronics will offset losses from the drop in UMC Electronics' long position.| APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Apple Inc | APPLIED MATERIALS vs. Microsoft | APPLIED MATERIALS vs. Microsoft |
| UMC Electronics vs. CECO ENVIRONMENTAL | UMC Electronics vs. Datadog | UMC Electronics vs. Hyrican Informationssysteme Aktiengesellschaft | UMC Electronics vs. Perma Fix Environmental Services |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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