Correlation Between Analog Devices and United Microelectronics

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

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

Diversification Opportunities for Analog Devices and United Microelectronics

0.51

Correlation Coefficient

Analog Devices  United Microelectronics

Very weak diversification

The 3 months correlation between Analog and United is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Analog Devices 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 Analog Devices are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Analog Devices i.e., Analog Devices and United Microelectronics go up and down completely randomly.

Pair Corralation between Analog Devices and United Microelectronics

Considering the 90-day investment horizon Analog Devices is expected to generate 1.05 times more return on investment than United Microelectronics. However, Analog Devices is 1.05 times more volatile than United Microelectronics. It trades about 0.02 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.19 per unit of risk. If you would invest  21,906  in Analog Devices on September 5, 2024 and sell it today you would earn a total of  248.00  from holding Analog Devices or generate 1.13% return on investment over 90 days.

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

Analog Devices  vs.  United Microelectronics

Analog Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

United Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Analog Devices and United Microelectronics

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

The idea behind Analog Devices and United Microelectronics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.