Correlation Between Hewlett Packard and United Microelectronics

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

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

Diversification Opportunities for Hewlett Packard and United Microelectronics

-0.67

Correlation Coefficient

Hewlett Packard  United Microelectronics

Excellent diversification

The 3 months correlation between Hewlett and United is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and United Microelectronics go up and down completely randomly.

Pair Corralation between Hewlett Packard and United Microelectronics

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to generate 1.41 times more return on investment than United Microelectronics. However, Hewlett Packard is 1.41 times more volatile than United Microelectronics. It trades about 0.09 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.16 per unit of risk. If you would invest  1,864  in Hewlett Packard Enterprise on September 4, 2024 and sell it today you would earn a total of  261.00  from holding Hewlett Packard Enterprise or generate 14.0% return on investment over 90 days.

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

Hewlett Packard Enterprise  vs.  United Microelectronics

Hewlett Packard Ente

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Hewlett Packard exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Hewlett Packard and United Microelectronics

The main advantage of trading using opposite Hewlett Packard and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.