Correlation Between Global Unichip and EMemory Technology

Can any of the company-specific risk be diversified away by investing in both Global Unichip and EMemory Technology 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 Global Unichip and EMemory Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Unichip Corp and eMemory Technology, you can compare the effects of market volatilities on Global Unichip and EMemory Technology 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 Global Unichip with a short position of EMemory Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Unichip and EMemory Technology.

Diversification Opportunities for Global Unichip and EMemory Technology

0.87

Correlation Coefficient

Global Unichip  EMemory Technology

Very poor diversification

The 3 months correlation between Global and EMemory is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global Unichip Corp and eMemory Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eMemory Technology and Global Unichip 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 Global Unichip Corp are associated (or correlated) with EMemory Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eMemory Technology has no effect on the direction of Global Unichip i.e., Global Unichip and EMemory Technology go up and down completely randomly.

Pair Corralation between Global Unichip and EMemory Technology

Assuming the 90 days trading horizon Global Unichip is expected to generate 1.36 times less return on investment than EMemory Technology. But when comparing it to its historical volatility, Global Unichip Corp is 1.17 times less risky than EMemory Technology. It trades about 0.14 of its potential returns per unit of risk. eMemory Technology is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  234,000  in eMemory Technology on September 14, 2024 and sell it today you would earn a total of  88,500  from holding eMemory Technology or generate 37.82% return on investment over 90 days.

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

Global Unichip Corp  vs.  eMemory Technology

Global Unichip Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Unichip Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Global Unichip showed solid returns over the last few months and may actually be approaching a breakup point.

eMemory Technology

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in eMemory Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, EMemory Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global Unichip and EMemory Technology

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

The idea behind Global Unichip Corp and eMemory Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.