Correlation Between U Media and Chialin Precision

Can any of the company-specific risk be diversified away by investing in both U Media and Chialin Precision 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 Chialin Precision 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 Chialin Precision Industrial, you can compare the effects of market volatilities on U Media and Chialin Precision 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 Chialin Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Chialin Precision.

Diversification Opportunities for U Media and Chialin Precision

0.39

Correlation Coefficient

U Media  Chialin Precision

Weak diversification

The 3 months correlation between 6470 and Chialin is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Chialin Precision Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chialin Precision 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 Chialin Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chialin Precision has no effect on the direction of U Media i.e., U Media and Chialin Precision go up and down completely randomly.

Pair Corralation between U Media and Chialin Precision

Assuming the 90 days trading horizon U Media is expected to generate 5.55 times less return on investment than Chialin Precision. In addition to that, U Media is 2.31 times more volatile than Chialin Precision Industrial. It trades about 0.02 of its total potential returns per unit of risk. Chialin Precision Industrial is currently generating about 0.19 per unit of volatility. If you would invest  8,430  in Chialin Precision Industrial on October 8, 2024 and sell it today you would earn a total of  1,190  from holding Chialin Precision Industrial or generate 14.12% return on investment over 90 days.

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

U Media Communications  vs.  Chialin Precision Industrial

U Media Communications

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 1 (%) 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.

Chialin Precision

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chialin Precision Industrial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chialin Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Media and Chialin Precision

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

The idea behind U Media Communications and Chialin Precision Industrial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.