Correlation Between North American and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and UMC Electronics Co, you can compare the effects of market volatilities on North American 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 North American with a short position of UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and UMC Electronics.
Diversification Opportunities for North American and UMC Electronics
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between North and UMC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and North American 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 North American Construction 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 North American i.e., North American and UMC Electronics go up and down completely randomly.
Pair Corralation between North American and UMC Electronics
Assuming the 90 days horizon North American Construction is expected to generate 0.86 times more return on investment than UMC Electronics. However, North American Construction is 1.17 times less risky than UMC Electronics. It trades about -0.04 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.05 per unit of risk. If you would invest 1,565 in North American Construction on January 7, 2025 and sell it today you would lose (275.00) from holding North American Construction or give up 17.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.32% |
| Values | Daily Returns |
North American Construction vs. UMC Electronics Co
Performance |
| Timeline |
| North American Const |
| UMC Electronics |
North American and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and UMC Electronics
The main advantage of trading using opposite North American and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. IMAGIN MEDICAL INC | North American vs. Medical Properties Trust | North American vs. COGNYTE SOFTWARE LTD | North American vs. Sqs Software Quality |
| UMC Electronics vs. SINGAPORE AIRLINES | UMC Electronics vs. JAPAN AIRLINES | UMC Electronics vs. UNIQA INSURANCE GR | UMC Electronics vs. Sabre Insurance Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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