Correlation Between U Media and Microelectronics

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

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

Diversification Opportunities for U Media and Microelectronics

0.01

Correlation Coefficient

U Media  Microelectronics

Significant diversification

The 3 months correlation between 6470 and Microelectronics is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Microelectronics Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microelectronics Tec and U Media 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 U Media Communications are associated (or correlated) with Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microelectronics Tec has no effect on the direction of U Media i.e., U Media and Microelectronics go up and down completely randomly.

Pair Corralation between U Media and Microelectronics

Assuming the 90 days trading horizon U Media is expected to generate 2.55 times less return on investment than Microelectronics. But when comparing it to its historical volatility, U Media Communications is 1.23 times less risky than Microelectronics. It trades about 0.03 of its potential returns per unit of risk. Microelectronics Technology is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,075  in Microelectronics Technology on December 5, 2024 and sell it today you would earn a total of  240.00  from holding Microelectronics Technology or generate 7.8% return on investment over 90 days.

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

U Media Communications  vs.  Microelectronics Technology

U Media Communications

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, U Media is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Microelectronics Tec

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Microelectronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with U Media and Microelectronics

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

The idea behind U Media Communications and Microelectronics 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.