Correlation Between UMC Electronics and China Construction
Can any of the company-specific risk be diversified away by investing in both UMC Electronics and China Construction 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 UMC Electronics and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UMC Electronics Co and China Construction Bank, you can compare the effects of market volatilities on UMC Electronics and China Construction 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 UMC Electronics with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and China Construction.
Diversification Opportunities for UMC Electronics and China Construction
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between UMC and China is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank and UMC Electronics 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 UMC Electronics Co are associated (or correlated) with China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of UMC Electronics i.e., UMC Electronics and China Construction go up and down completely randomly.
Pair Corralation between UMC Electronics and China Construction
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the China Construction. In addition to that, UMC Electronics is 1.08 times more volatile than China Construction Bank. It trades about -0.03 of its total potential returns per unit of risk. China Construction Bank is currently generating about 0.03 per unit of volatility. If you would invest 58.00 in China Construction Bank on August 25, 2024 and sell it today you would earn a total of 16.00 from holding China Construction Bank or generate 27.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
UMC Electronics Co vs. China Construction Bank
Performance |
| Timeline |
| UMC Electronics |
| China Construction Bank |
UMC Electronics and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and China Construction
The main advantage of trading using opposite UMC Electronics and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| UMC Electronics vs. Verizon Communications | UMC Electronics vs. APPLIED MATERIALS | UMC Electronics vs. Plastic Omnium | UMC Electronics vs. THRACE PLASTICS |
| China Construction vs. Rogers Communications | China Construction vs. Ribbon Communications | China Construction vs. Iridium Communications | China Construction vs. UMC Electronics Co |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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