Correlation Between UMC Electronics and WUXI BIOLOGICS

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

By analyzing existing cross correlation between UMC Electronics Co and WUXI BIOLOGICS UNSPADR2, you can compare the effects of market volatilities on UMC Electronics and WUXI BIOLOGICS 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 UMC Electronics with a short position of WUXI BIOLOGICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and WUXI BIOLOGICS.

Diversification Opportunities for UMC Electronics and WUXI BIOLOGICS

-0.09

Correlation Coefficient

UMC Electronics  WUXI BIOLOGICS

Good diversification

The 3 months correlation between UMC and WUXI is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and WUXI BIOLOGICS UNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WUXI BIOLOGICS UNSPADR2 and UMC Electronics 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 UMC Electronics Co are associated (or correlated) with WUXI BIOLOGICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WUXI BIOLOGICS UNSPADR2 has no effect on the direction of UMC Electronics i.e., UMC Electronics and WUXI BIOLOGICS go up and down completely randomly.

Pair Corralation between UMC Electronics and WUXI BIOLOGICS

Assuming the 90 days horizon UMC Electronics Co is expected to generate 0.55 times more return on investment than WUXI BIOLOGICS. However, UMC Electronics Co is 1.8 times less risky than WUXI BIOLOGICS. It trades about -0.04 of its potential returns per unit of risk. WUXI BIOLOGICS UNSPADR2 is currently generating about -0.04 per unit of risk. If you would invest  290.00  in UMC Electronics Co on October 6, 2024 and sell it today you would lose (102.00) from holding UMC Electronics Co or give up 35.17% of portfolio value over 90 days.

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

UMC Electronics Co  vs.  WUXI BIOLOGICS UNSPADR2

UMC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

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

WUXI BIOLOGICS UNSPADR2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WUXI BIOLOGICS UNSPADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with UMC Electronics and WUXI BIOLOGICS

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

The idea behind UMC Electronics Co and WUXI BIOLOGICS UNSPADR2 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.