Correlation Between LANDSEA HOMES and UMC Electronics

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

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

Diversification Opportunities for LANDSEA HOMES and UMC Electronics

0.59

Correlation Coefficient

LANDSEA HOMES  UMC Electronics

Very weak diversification

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

Pair Corralation between LANDSEA HOMES and UMC Electronics

Assuming the 90 days horizon LANDSEA HOMES P is expected to generate 1.16 times more return on investment than UMC Electronics. However, LANDSEA HOMES is 1.16 times more volatile than UMC Electronics Co. It trades about 0.03 of its potential returns per unit of risk. UMC Electronics Co is currently generating about -0.04 per unit of risk. If you would invest  575.00  in LANDSEA HOMES P on October 22, 2024 and sell it today you would earn a total of  195.00  from holding LANDSEA HOMES P or generate 33.91% return on investment over 90 days.

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

LANDSEA HOMES P  vs.  UMC Electronics Co

LANDSEA HOMES P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LANDSEA HOMES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

UMC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UMC Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with LANDSEA HOMES and UMC Electronics

The main advantage of trading using opposite LANDSEA HOMES and UMC Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LANDSEA HOMES 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 LANDSEA HOMES P 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.

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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.