Correlation Between UMC Electronics and North American
Can any of the company-specific risk be diversified away by investing in both UMC Electronics and North American 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 North American 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 North American Construction, you can compare the effects of market volatilities on UMC Electronics and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and North American.
Diversification Opportunities for UMC Electronics and North American
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between UMC and North is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and North American Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Const 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 North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Const has no effect on the direction of UMC Electronics i.e., UMC Electronics and North American go up and down completely randomly.
Pair Corralation between UMC Electronics and North American
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the North American. In addition to that, UMC Electronics is 1.1 times more volatile than North American Construction. It trades about -0.12 of its total potential returns per unit of risk. North American Construction is currently generating about 0.07 per unit of volatility. If you would invest 1,649 in North American Construction on September 3, 2024 and sell it today you would earn a total of 131.00 from holding North American Construction or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UMC Electronics Co vs. North American Construction
Performance |
| Timeline |
| UMC Electronics |
| North American Const |
UMC Electronics and North American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and North American
The main advantage of trading using opposite UMC Electronics and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.| UMC Electronics vs. ASURE SOFTWARE | UMC Electronics vs. Axway Software SA | UMC Electronics vs. Micron Technology | UMC Electronics vs. AXWAY SOFTWARE EO |
| North American vs. Halliburton | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. Origin Agritech |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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