Correlation Between STMicroelectronics and UMC Electronics
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics 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 STMicroelectronics and UMC Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and UMC Electronics Co, you can compare the effects of market volatilities on STMicroelectronics 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 STMicroelectronics with a short position of UMC Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and UMC Electronics.
Diversification Opportunities for STMicroelectronics and UMC Electronics
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between STMicroelectronics and UMC is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and STMicroelectronics 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 STMicroelectronics NV 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 STMicroelectronics i.e., STMicroelectronics and UMC Electronics go up and down completely randomly.
Pair Corralation between STMicroelectronics and UMC Electronics
Assuming the 90 days horizon STMicroelectronics NV is expected to under-perform the UMC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, STMicroelectronics NV is 1.23 times less risky than UMC Electronics. The stock trades about -0.07 of its potential returns per unit of risk. The UMC Electronics Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 208.00 in UMC Electronics Co on November 7, 2024 and sell it today you would lose (28.00) from holding UMC Electronics Co or give up 13.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
STMicroelectronics NV vs. UMC Electronics Co
Performance |
| Timeline |
| STMicroelectronics |
| UMC Electronics |
STMicroelectronics and UMC Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and UMC Electronics
The main advantage of trading using opposite STMicroelectronics and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics 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.| STMicroelectronics vs. JIAHUA STORES | STMicroelectronics vs. FAST RETAIL ADR | STMicroelectronics vs. TELECOM ITALIA | STMicroelectronics vs. China Communications Services |
| UMC Electronics vs. ARDAGH METAL PACDL 0001 | UMC Electronics vs. BlueScope Steel Limited | UMC Electronics vs. MAANSHAN IRON H | UMC Electronics vs. ANGANG STEEL H |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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