Correlation Between Ablerex Electronics and Universal Microelectronics

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

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

Diversification Opportunities for Ablerex Electronics and Universal Microelectronics

0.2

Correlation Coefficient

Ablerex Electronics  Universal Microelectronics

Modest diversification

The 3 months correlation between Ablerex and Universal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ablerex Electronics Co and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and Ablerex Electronics 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 Ablerex Electronics Co are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of Ablerex Electronics i.e., Ablerex Electronics and Universal Microelectronics go up and down completely randomly.

Pair Corralation between Ablerex Electronics and Universal Microelectronics

Assuming the 90 days trading horizon Ablerex Electronics Co is expected to under-perform the Universal Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Ablerex Electronics Co is 1.92 times less risky than Universal Microelectronics. The stock trades about -0.2 of its potential returns per unit of risk. The Universal Microelectronics Co is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,615  in Universal Microelectronics Co on October 10, 2024 and sell it today you would lose (175.00) from holding Universal Microelectronics Co or give up 6.69% of portfolio value over 90 days.

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

Ablerex Electronics Co  vs.  Universal Microelectronics Co

Ablerex Electronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ablerex Electronics Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ablerex Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Universal Microelectronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 5 (%) 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.

Pair Trading with Ablerex Electronics and Universal Microelectronics

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

The idea behind Ablerex Electronics Co and Universal Microelectronics Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.