Correlation Between ASE Industrial and United Microelectronics
Can any of the company-specific risk be diversified away by investing in both ASE Industrial 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 ASE Industrial and United Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASE Industrial Holding and United Microelectronics, you can compare the effects of market volatilities on ASE Industrial 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 ASE Industrial with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASE Industrial and United Microelectronics.
Diversification Opportunities for ASE Industrial and United Microelectronics
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between ASE and United is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ASE Industrial Holding and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and ASE Industrial 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 ASE Industrial Holding 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 ASE Industrial i.e., ASE Industrial and United Microelectronics go up and down completely randomly.
Pair Corralation between ASE Industrial and United Microelectronics
Considering the 90-day investment horizon ASE Industrial Holding is expected to generate 0.97 times more return on investment than United Microelectronics. However, ASE Industrial Holding is 1.03 times less risky than United Microelectronics. It trades about -0.06 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.26 per unit of risk. If you would invest 1,014 in ASE Industrial Holding on August 24, 2024 and sell it today you would lose (33.00) from holding ASE Industrial Holding or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASE Industrial Holding vs. United Microelectronics
Performance |
| Timeline |
| ASE Industrial Holding |
| United Microelectronics |
ASE Industrial and United Microelectronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASE Industrial and United Microelectronics
The main advantage of trading using opposite ASE Industrial and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASE Industrial 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.| ASE Industrial vs. NVIDIA | ASE Industrial vs. Taiwan Semiconductor Manufacturing | ASE Industrial vs. Marvell Technology Group | ASE Industrial vs. Micron Technology |
| United Microelectronics vs. Silicon Motion Technology | United Microelectronics vs. ASE Industrial Holding | United Microelectronics vs. ChipMOS Technologies | United Microelectronics vs. SemiLEDS |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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