Correlation Between STMICROELECTRONICS and UET United

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

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

Diversification Opportunities for STMICROELECTRONICS and UET United

-0.36

Correlation Coefficient

STMICROELECTRONICS  UET United

Very good diversification

The 3 months correlation between STMICROELECTRONICS and UET is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding STMICROELECTRONICS and UET United Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UET United Electronic and STMICROELECTRONICS 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 STMICROELECTRONICS are associated (or correlated) with UET United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UET United Electronic has no effect on the direction of STMICROELECTRONICS i.e., STMICROELECTRONICS and UET United go up and down completely randomly.

Pair Corralation between STMICROELECTRONICS and UET United

Assuming the 90 days trading horizon STMICROELECTRONICS is expected to generate 9.9 times less return on investment than UET United. But when comparing it to its historical volatility, STMICROELECTRONICS is 2.7 times less risky than UET United. It trades about 0.02 of its potential returns per unit of risk. UET United Electronic is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  81.00  in UET United Electronic on October 6, 2024 and sell it today you would earn a total of  9.00  from holding UET United Electronic or generate 11.11% return on investment over 90 days.

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

STMICROELECTRONICS  vs.  UET United Electronic

STMICROELECTRONICS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STMICROELECTRONICS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, STMICROELECTRONICS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

UET United Electronic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UET United Electronic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, UET United may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with STMICROELECTRONICS and UET United

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

The idea behind STMICROELECTRONICS and UET United Electronic 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.