Correlation Between AVerMedia Technologies and U Media

Can any of the company-specific risk be diversified away by investing in both AVerMedia Technologies and U Media 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 AVerMedia Technologies and U Media into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AVerMedia Technologies and U Media Communications, you can compare the effects of market volatilities on AVerMedia Technologies and U Media 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 AVerMedia Technologies with a short position of U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of AVerMedia Technologies and U Media.

Diversification Opportunities for AVerMedia Technologies and U Media

0.07

Correlation Coefficient

AVerMedia Technologies  U Media

Significant diversification

The 3 months correlation between AVerMedia and 6470 is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding AVerMedia Technologies and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications and AVerMedia Technologies 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 AVerMedia Technologies are associated (or correlated) with U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of AVerMedia Technologies i.e., AVerMedia Technologies and U Media go up and down completely randomly.

Pair Corralation between AVerMedia Technologies and U Media

Assuming the 90 days trading horizon AVerMedia Technologies is expected to under-perform the U Media. But the stock apears to be less risky and, when comparing its historical volatility, AVerMedia Technologies is 1.15 times less risky than U Media. The stock trades about -0.06 of its potential returns per unit of risk. The U Media Communications is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,100  in U Media Communications on September 12, 2024 and sell it today you would earn a total of  880.00  from holding U Media Communications or generate 17.25% return on investment over 90 days.

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

AVerMedia Technologies  vs.  U Media Communications

AVerMedia Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVerMedia Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

U Media Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Media showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AVerMedia Technologies and U Media

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

The idea behind AVerMedia Technologies and U Media Communications 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.