Correlation Between Chroma ATE and Unimicron Technology

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

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

Diversification Opportunities for Chroma ATE and Unimicron Technology

0.72

Correlation Coefficient

Chroma ATE  Unimicron Technology

Poor diversification

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

Pair Corralation between Chroma ATE and Unimicron Technology

Assuming the 90 days trading horizon Chroma ATE is expected to generate 1.82 times more return on investment than Unimicron Technology. However, Chroma ATE is 1.82 times more volatile than Unimicron Technology Corp. It trades about -0.04 of its potential returns per unit of risk. Unimicron Technology Corp is currently generating about -0.36 per unit of risk. If you would invest  42,100  in Chroma ATE on September 16, 2024 and sell it today you would lose (1,600) from holding Chroma ATE or give up 3.8% of portfolio value over 90 days.

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

Chroma ATE  vs.  Unimicron Technology Corp

Chroma ATE

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chroma ATE are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chroma ATE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Unimicron Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unimicron Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Unimicron Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Chroma ATE and Unimicron Technology

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

The idea behind Chroma ATE and Unimicron Technology Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.