Correlation Between Universal Microelectronics and GCS Holdings

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

Diversification Opportunities for Universal Microelectronics and GCS Holdings

0.38

Correlation Coefficient

Universal Microelectronics  GCS Holdings

Weak diversification

The 3 months correlation between Universal and GCS is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Universal Microelectronics Co and GCS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GCS Holdings 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 GCS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GCS Holdings has no effect on the direction of Universal Microelectronics i.e., Universal Microelectronics and GCS Holdings go up and down completely randomly.

Pair Corralation between Universal Microelectronics and GCS Holdings

Assuming the 90 days trading horizon Universal Microelectronics Co is expected to under-perform the GCS Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Universal Microelectronics Co is 1.87 times less risky than GCS Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The GCS Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  10,700  in GCS Holdings on October 10, 2024 and sell it today you would earn a total of  2,350  from holding GCS Holdings or generate 21.96% return on investment over 90 days.

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

Universal Microelectronics Co  vs.  GCS Holdings

Universal Microelectronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 6 (%) 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.

GCS Holdings

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GCS Holdings are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, GCS Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal Microelectronics and GCS Holdings

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

The idea behind Universal Microelectronics Co and GCS Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.