Correlation Between China Airlines and UPI Semiconductor

Can any of the company-specific risk be diversified away by investing in both China Airlines and UPI Semiconductor 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 China Airlines and UPI Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Airlines and uPI Semiconductor Corp, you can compare the effects of market volatilities on China Airlines and UPI Semiconductor 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 China Airlines with a short position of UPI Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Airlines and UPI Semiconductor.

Diversification Opportunities for China Airlines and UPI Semiconductor

-0.81

Correlation Coefficient

China Airlines  UPI Semiconductor

Pay attention - limited upside

The 3 months correlation between China and UPI is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding China Airlines and uPI Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on uPI Semiconductor Corp and China Airlines 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 China Airlines are associated (or correlated) with UPI Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of uPI Semiconductor Corp has no effect on the direction of China Airlines i.e., China Airlines and UPI Semiconductor go up and down completely randomly.

Pair Corralation between China Airlines and UPI Semiconductor

Assuming the 90 days trading horizon China Airlines is expected to under-perform the UPI Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, China Airlines is 1.31 times less risky than UPI Semiconductor. The stock trades about -0.12 of its potential returns per unit of risk. The uPI Semiconductor Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  22,400  in uPI Semiconductor Corp on October 4, 2024 and sell it today you would earn a total of  100.00  from holding uPI Semiconductor Corp or generate 0.45% return on investment over 90 days.

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

China Airlines  vs.  uPI Semiconductor Corp

China Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Airlines are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, China Airlines showed solid returns over the last few months and may actually be approaching a breakup point.

uPI Semiconductor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days uPI Semiconductor Corp 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.

Pair Trading with China Airlines and UPI Semiconductor

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

The idea behind China Airlines and uPI Semiconductor Corp 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.