Correlation Between CKM Building and Universal Microelectronics

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

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

Diversification Opportunities for CKM Building and Universal Microelectronics

-0.59

Correlation Coefficient

CKM Building  Universal Microelectronics

Excellent diversification

The 3 months correlation between CKM and Universal is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CKM Building Material and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and CKM Building 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 CKM Building Material 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 CKM Building i.e., CKM Building and Universal Microelectronics go up and down completely randomly.

Pair Corralation between CKM Building and Universal Microelectronics

Assuming the 90 days trading horizon CKM Building Material is expected to generate 0.35 times more return on investment than Universal Microelectronics. However, CKM Building Material is 2.84 times less risky than Universal Microelectronics. It trades about 0.2 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about -0.01 per unit of risk. If you would invest  3,515  in CKM Building Material on October 11, 2024 and sell it today you would earn a total of  175.00  from holding CKM Building Material or generate 4.98% return on investment over 90 days.

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

CKM Building Material  vs.  Universal Microelectronics Co

CKM Building Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CKM Building Material has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CKM Building is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Universal Microelectronics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 6 (%) 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 CKM Building and Universal Microelectronics

The main advantage of trading using opposite CKM Building and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CKM Building 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 CKM Building Material 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 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.