Correlation Between United Integrated and Te Chang

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

By analyzing existing cross correlation between United Integrated Services and Te Chang Construction, you can compare the effects of market volatilities on United Integrated and Te Chang 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 Integrated with a short position of Te Chang. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Integrated and Te Chang.

Diversification Opportunities for United Integrated and Te Chang

0.72

Correlation Coefficient

United Integrated  Te Chang

Poor diversification

The 3 months correlation between United and 5511 is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding United Integrated Services and Te Chang Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Te Chang Construction and United Integrated 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 Integrated Services are associated (or correlated) with Te Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Te Chang Construction has no effect on the direction of United Integrated i.e., United Integrated and Te Chang go up and down completely randomly.

Pair Corralation between United Integrated and Te Chang

Assuming the 90 days trading horizon United Integrated Services is expected to generate 1.2 times more return on investment than Te Chang. However, United Integrated is 1.2 times more volatile than Te Chang Construction. It trades about 0.1 of its potential returns per unit of risk. Te Chang Construction is currently generating about 0.1 per unit of risk. If you would invest  18,300  in United Integrated Services on September 20, 2024 and sell it today you would earn a total of  29,400  from holding United Integrated Services or generate 160.66% return on investment over 90 days.

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

United Integrated Services  vs.  Te Chang Construction

United Integrated

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Integrated Services are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, United Integrated showed solid returns over the last few months and may actually be approaching a breakup point.

Te Chang Construction

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Te Chang Construction are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Te Chang may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Integrated and Te Chang

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

The idea behind United Integrated Services and Te Chang Construction 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.