Correlation Between UMC Electronics and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both UMC Electronics and Samsung 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 UMC Electronics and Samsung Electronics 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 Samsung Electronics Co, you can compare the effects of market volatilities on UMC Electronics and Samsung 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 UMC Electronics with a short position of Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and Samsung Electronics.
Diversification Opportunities for UMC Electronics and Samsung Electronics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UMC and Samsung is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of UMC Electronics i.e., UMC Electronics and Samsung Electronics go up and down completely randomly.
Pair Corralation between UMC Electronics and Samsung Electronics
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the Samsung Electronics. But the stock apears to be less risky and, when comparing its historical volatility, UMC Electronics Co is 1.31 times less risky than Samsung Electronics. The stock trades about -0.15 of its potential returns per unit of risk. The Samsung Electronics Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 98,000 in Samsung Electronics Co on August 27, 2024 and sell it today you would lose (200.00) from holding Samsung Electronics Co or give up 0.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UMC Electronics Co vs. Samsung Electronics Co
Performance |
| Timeline |
| UMC Electronics |
| Samsung Electronics |
UMC Electronics and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and Samsung Electronics
The main advantage of trading using opposite UMC Electronics and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics position performs unexpectedly, Samsung 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' long position.| UMC Electronics vs. Harmony Gold Mining | UMC Electronics vs. Calibre Mining Corp | UMC Electronics vs. MACOM Technology Solutions | UMC Electronics vs. Check Point Software |
| Samsung Electronics vs. Amazon Inc | Samsung Electronics vs. Microsoft | Samsung Electronics vs. Tesla Inc | Samsung Electronics vs. Alphabet Class A |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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