Correlation Between FAST RETAIL and UMC Electronics

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

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

Diversification Opportunities for FAST RETAIL and UMC Electronics

-0.47

Correlation Coefficient

FAST RETAIL  UMC Electronics

Very good diversification

The 3 months correlation between FAST and UMC is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and UMC Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMC Electronics and FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and UMC Electronics go up and down completely randomly.

Pair Corralation between FAST RETAIL and UMC Electronics

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the UMC Electronics. But the stock apears to be less risky and, when comparing its historical volatility, FAST RETAIL ADR is 1.91 times less risky than UMC Electronics. The stock trades about -0.15 of its potential returns per unit of risk. The UMC Electronics Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  174.00  in UMC Electronics Co on December 27, 2024 and sell it today you would earn a total of  17.00  from holding UMC Electronics Co or generate 9.77% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  UMC Electronics Co

FAST RETAIL ADR

Risk-Adjusted Performance

Very Weak

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

UMC Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UMC Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, UMC Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FAST RETAIL and UMC Electronics

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

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.