Correlation Between UMC Electronics and United Utilities
Can any of the company-specific risk be diversified away by investing in both UMC Electronics and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on UMC Electronics and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and United Utilities.
Diversification Opportunities for UMC Electronics and United Utilities
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between UMC and United is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of UMC Electronics i.e., UMC Electronics and United Utilities go up and down completely randomly.
Pair Corralation between UMC Electronics and United Utilities
Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the United Utilities. In addition to that, UMC Electronics is 1.42 times more volatile than United Utilities Group. It trades about -0.18 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.34 per unit of volatility. If you would invest 1,214 in United Utilities Group on September 3, 2024 and sell it today you would earn a total of 136.00 from holding United Utilities Group or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UMC Electronics Co vs. United Utilities Group
Performance |
| Timeline |
| UMC Electronics |
| United Utilities |
UMC Electronics and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UMC Electronics and United Utilities
The main advantage of trading using opposite UMC Electronics and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMC Electronics position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| UMC Electronics vs. ASURE SOFTWARE | UMC Electronics vs. Axway Software SA | UMC Electronics vs. Micron Technology | UMC Electronics vs. AXWAY SOFTWARE EO |
| United Utilities vs. Guangdong Investment Limited | United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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