Correlation Between Universal Microelectronics and Wan Hai

Can any of the company-specific risk be diversified away by investing in both Universal Microelectronics and Wan Hai 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 Wan Hai 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 Wan Hai Lines, you can compare the effects of market volatilities on Universal Microelectronics and Wan Hai 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 Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Microelectronics and Wan Hai.

Diversification Opportunities for Universal Microelectronics and Wan Hai

0.41

Correlation Coefficient

Universal Microelectronics  Wan Hai

Very weak diversification

The 3 months correlation between Universal and Wan is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines 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 Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and Wan Hai go up and down completely randomly.

Pair Corralation between Universal Microelectronics and Wan Hai

Assuming the 90 days trading horizon Universal Microelectronics Co is expected to under-perform the Wan Hai. But the stock apears to be less risky and, when comparing its historical volatility, Universal Microelectronics Co is 1.09 times less risky than Wan Hai. The stock trades about -0.01 of its potential returns per unit of risk. The Wan Hai Lines is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,050  in Wan Hai Lines on December 30, 2024 and sell it today you would earn a total of  170.00  from holding Wan Hai Lines or generate 2.11% return on investment over 90 days.

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

Universal Microelectronics Co  vs.  Wan Hai Lines

Universal Microelectronics

Risk-Adjusted Performance

Very Weak

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

Wan Hai Lines

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wan Hai Lines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wan Hai 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 Wan Hai

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

The idea behind Universal Microelectronics Co and Wan Hai Lines 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.