Correlation Between UNISEM and ICD

Can any of the company-specific risk be diversified away by investing in both UNISEM and ICD 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 UNISEM and ICD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UNISEM Co and ICD Co, you can compare the effects of market volatilities on UNISEM and ICD 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 UNISEM with a short position of ICD. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNISEM and ICD.

Diversification Opportunities for UNISEM and ICD

0.51

Correlation Coefficient

UNISEM  ICD

Very weak diversification

The 3 months correlation between UNISEM and ICD is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding UNISEM Co and ICD Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICD Co and UNISEM 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 UNISEM Co are associated (or correlated) with ICD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICD Co has no effect on the direction of UNISEM i.e., UNISEM and ICD go up and down completely randomly.

Pair Corralation between UNISEM and ICD

Assuming the 90 days trading horizon UNISEM is expected to generate 1.19 times less return on investment than ICD. But when comparing it to its historical volatility, UNISEM Co is 1.92 times less risky than ICD. It trades about 0.06 of its potential returns per unit of risk. ICD Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  426,500  in ICD Co on December 30, 2024 and sell it today you would earn a total of  17,500  from holding ICD Co or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

UNISEM Co  vs.  ICD Co

UNISEM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNISEM Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UNISEM may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ICD Co

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ICD Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ICD sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNISEM and ICD

The main advantage of trading using opposite UNISEM and ICD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNISEM position performs unexpectedly, ICD 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 ICD will offset losses from the drop in ICD's long position.

The idea behind UNISEM Co and ICD Co 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.