Correlation Between CTS and United Microelectronics

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

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

Diversification Opportunities for CTS and United Microelectronics

-0.74

Correlation Coefficient

CTS  United Microelectronics

Pay attention - limited upside

The 3 months correlation between CTS and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CTS Corp. and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and CTS 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 CTS Corporation 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 CTS i.e., CTS and United Microelectronics go up and down completely randomly.

Pair Corralation between CTS and United Microelectronics

Considering the 90-day investment horizon CTS Corporation is expected to under-perform the United Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, CTS Corporation is 1.11 times less risky than United Microelectronics. The stock trades about -0.22 of its potential returns per unit of risk. The United Microelectronics is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  669.00  in United Microelectronics on October 10, 2024 and sell it today you would lose (30.00) from holding United Microelectronics or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

CTS Corp.  vs.  United Microelectronics

CTS Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CTS Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CTS and United Microelectronics

The main advantage of trading using opposite CTS and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTS 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 CTS Corporation 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.