Correlation Between Holy Stone and United Microelectronics

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

By analyzing existing cross correlation between Holy Stone Enterprise and United Microelectronics, you can compare the effects of market volatilities on Holy Stone and United Microelectronics 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 Holy Stone with a short position of United Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and United Microelectronics.

Diversification Opportunities for Holy Stone and United Microelectronics

0.45

Correlation Coefficient

Holy Stone  United Microelectronics

Very weak diversification

The 3 months correlation between Holy and United is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Holy Stone i.e., Holy Stone and United Microelectronics go up and down completely randomly.

Pair Corralation between Holy Stone and United Microelectronics

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to generate 0.55 times more return on investment than United Microelectronics. However, Holy Stone Enterprise is 1.82 times less risky than United Microelectronics. It trades about 0.16 of its potential returns per unit of risk. United Microelectronics is currently generating about 0.06 per unit of risk. If you would invest  8,610  in Holy Stone Enterprise on December 22, 2024 and sell it today you would earn a total of  680.00  from holding Holy Stone Enterprise or generate 7.9% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  United Microelectronics

Holy Stone Enterprise

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Holy Stone Enterprise are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Holy Stone may actually be approaching a critical reversion point that can send shares even higher in April 2025.

United Microelectronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Microelectronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, United Microelectronics 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 Holy Stone and United Microelectronics

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

The idea behind Holy Stone Enterprise and United Microelectronics 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.