Correlation Between Gold Fields and United Microelectronics

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

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

Diversification Opportunities for Gold Fields and United Microelectronics

0.61

Correlation Coefficient

Gold Fields  United Microelectronics

Poor diversification

The 3 months correlation between Gold and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and United Microelectronics go up and down completely randomly.

Pair Corralation between Gold Fields and United Microelectronics

Considering the 90-day investment horizon Gold Fields Ltd is expected to generate 1.55 times more return on investment than United Microelectronics. However, Gold Fields is 1.55 times more volatile than United Microelectronics. It trades about 0.03 of its potential returns per unit of risk. United Microelectronics is currently generating about 0.01 per unit of risk. If you would invest  1,192  in Gold Fields Ltd on October 4, 2024 and sell it today you would earn a total of  213.50  from holding Gold Fields Ltd or generate 17.91% return on investment over 90 days.

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

Gold Fields Ltd  vs.  United Microelectronics

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Fields Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm 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 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 Gold Fields and United Microelectronics

The main advantage of trading using opposite Gold Fields and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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 Gold Fields Ltd 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.