Correlation Between KIMBALL ELECTRONICS and UMC Electronics

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

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

Diversification Opportunities for KIMBALL ELECTRONICS and UMC Electronics

-0.6

Correlation Coefficient

KIMBALL ELECTRONICS  UMC Electronics

Excellent diversification

The 3 months correlation between KIMBALL and UMC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding KIMBALL ELECTRONICS and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and KIMBALL 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 KIMBALL ELECTRONICS are associated (or correlated) with UMC Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMC Electronics has no effect on the direction of KIMBALL ELECTRONICS i.e., KIMBALL ELECTRONICS and UMC Electronics go up and down completely randomly.

Pair Corralation between KIMBALL ELECTRONICS and UMC Electronics

Assuming the 90 days horizon KIMBALL ELECTRONICS is expected to under-perform the UMC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, KIMBALL ELECTRONICS is 1.5 times less risky than UMC Electronics. The stock trades about -0.08 of its potential returns per unit of risk. The UMC Electronics Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  187.00  in UMC Electronics Co on December 28, 2024 and sell it today you would earn a total of  4.00  from holding UMC Electronics Co or generate 2.14% return on investment over 90 days.

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

KIMBALL ELECTRONICS  vs.  UMC Electronics Co

KIMBALL ELECTRONICS

Risk-Adjusted Performance

Very Weak

Over the last 90 days KIMBALL ELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

UMC Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UMC Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, UMC Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KIMBALL ELECTRONICS and UMC Electronics

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

The idea behind KIMBALL ELECTRONICS and UMC Electronics 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.