Correlation Between UMC Electronics and EnBW Energie
Can any of the company-specific risk be diversified away by investing in both UMC Electronics and EnBW Energie 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 EnBW Energie 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 EnBW Energie Baden Wrttemberg, you can compare the effects of market volatilities on UMC Electronics and EnBW Energie 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 EnBW Energie. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and EnBW Energie.
Diversification Opportunities for UMC Electronics and EnBW Energie
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UMC and EnBW is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and EnBW Energie Baden Wrttemberg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnBW Energie Baden 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 EnBW Energie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnBW Energie Baden has no effect on the direction of UMC Electronics i.e., UMC Electronics and EnBW Energie go up and down completely randomly.
Pair Corralation between UMC Electronics and EnBW Energie
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the EnBW Energie. In addition to that, UMC Electronics is 1.71 times more volatile than EnBW Energie Baden Wrttemberg. It trades about -0.01 of its total potential returns per unit of risk. EnBW Energie Baden Wrttemberg is currently generating about 0.0 per unit of volatility. If you would invest 6,240 in EnBW Energie Baden Wrttemberg on September 5, 2024 and sell it today you would lose (40.00) from holding EnBW Energie Baden Wrttemberg or give up 0.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.85% |
| Values | Daily Returns |
UMC Electronics Co vs. EnBW Energie Baden Wrttemberg
Performance |
| Timeline |
| UMC Electronics |
| EnBW Energie Baden |
UMC Electronics and EnBW Energie Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and EnBW Energie
The main advantage of trading using opposite UMC Electronics and EnBW Energie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics position performs unexpectedly, EnBW Energie 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 EnBW Energie will offset losses from the drop in EnBW Energie's long position.The idea behind UMC Electronics Co and EnBW Energie Baden Wrttemberg pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| EnBW Energie vs. ELECTRONIC ARTS | EnBW Energie vs. Fair Isaac Corp | EnBW Energie vs. Methode Electronics | EnBW Energie 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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