Correlation Between Universal Microelectronics and Lien Chang

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

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

Diversification Opportunities for Universal Microelectronics and Lien Chang

0.85

Correlation Coefficient

Universal Microelectronics  Lien Chang

Very poor diversification

The 3 months correlation between Universal and Lien is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Lien Chang Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lien Chang Electronic and Universal 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 Universal Microelectronics Co are associated (or correlated) with Lien Chang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lien Chang Electronic has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Lien Chang go up and down completely randomly.

Pair Corralation between Universal Microelectronics and Lien Chang

Assuming the 90 days trading horizon Universal Microelectronics Co is expected to generate 0.87 times more return on investment than Lien Chang. However, Universal Microelectronics Co is 1.15 times less risky than Lien Chang. It trades about 0.11 of its potential returns per unit of risk. Lien Chang Electronic is currently generating about 0.01 per unit of risk. If you would invest  2,015  in Universal Microelectronics Co on September 16, 2024 and sell it today you would earn a total of  485.00  from holding Universal Microelectronics Co or generate 24.07% return on investment over 90 days.

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

Universal Microelectronics Co  vs.  Lien Chang Electronic

Universal Microelectronics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Lien Chang Electronic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lien Chang Electronic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Lien Chang 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 Universal Microelectronics and Lien Chang

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

The idea behind Universal Microelectronics Co and Lien Chang Electronic 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.