Correlation Between United Microelectronics and Advanced Wireless

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

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

Diversification Opportunities for United Microelectronics and Advanced Wireless

0.72

Correlation Coefficient

United Microelectronics  Advanced Wireless

Poor diversification

The 3 months correlation between United and Advanced is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Advanced Wireless Semiconducto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Wireless and United Microelectronics 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 United Microelectronics are associated (or correlated) with Advanced Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Wireless has no effect on the direction of United Microelectronics i.e., United Microelectronics and Advanced Wireless go up and down completely randomly.

Pair Corralation between United Microelectronics and Advanced Wireless

Assuming the 90 days trading horizon United Microelectronics is expected to under-perform the Advanced Wireless. But the stock apears to be less risky and, when comparing its historical volatility, United Microelectronics is 1.98 times less risky than Advanced Wireless. The stock trades about -0.31 of its potential returns per unit of risk. The Advanced Wireless Semiconductor is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  11,150  in Advanced Wireless Semiconductor on September 3, 2024 and sell it today you would lose (1,050) from holding Advanced Wireless Semiconductor or give up 9.42% of portfolio value over 90 days.

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

United Microelectronics  vs.  Advanced Wireless Semiconducto

United Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Advanced Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Wireless Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with United Microelectronics and Advanced Wireless

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

The idea behind United Microelectronics and Advanced Wireless Semiconductor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.