Correlation Between ZhongAn Online and UMC Electronics

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

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

Diversification Opportunities for ZhongAn Online and UMC Electronics

0.79

Correlation Coefficient

ZhongAn Online  UMC Electronics

Poor diversification

The 3 months correlation between ZhongAn and UMC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and ZhongAn Online 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 ZhongAn Online P are associated (or correlated) with UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of ZhongAn Online i.e., ZhongAn Online and UMC Electronics go up and down completely randomly.

Pair Corralation between ZhongAn Online and UMC Electronics

Assuming the 90 days trading horizon ZhongAn Online P is expected to generate 1.35 times more return on investment than UMC Electronics. However, ZhongAn Online is 1.35 times more volatile than UMC Electronics Co. It trades about -0.03 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.04 per unit of risk. If you would invest  298.00  in ZhongAn Online P on October 25, 2024 and sell it today you would lose (163.00) from holding ZhongAn Online P or give up 54.7% of portfolio value over 90 days.

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

ZhongAn Online P  vs.  UMC Electronics Co

ZhongAn Online P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

UMC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UMC Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ZhongAn Online and UMC Electronics

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

The idea behind ZhongAn Online P and UMC Electronics 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.