Correlation Between UMC Electronics and Freshpet

Can any of the company-specific risk be diversified away by investing in both UMC Electronics and Freshpet 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 Freshpet 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 Freshpet, you can compare the effects of market volatilities on UMC Electronics and Freshpet 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 Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and Freshpet.

Diversification Opportunities for UMC Electronics and Freshpet

-0.64

Correlation Coefficient

UMC Electronics  Freshpet

Excellent diversification

The 3 months correlation between UMC and Freshpet is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet 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 Freshpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshpet has no effect on the direction of UMC Electronics i.e., UMC Electronics and Freshpet go up and down completely randomly.

Pair Corralation between UMC Electronics and Freshpet

Assuming the 90 days horizon UMC Electronics Co is expected to generate 0.62 times more return on investment than Freshpet. However, UMC Electronics Co is 1.62 times less risky than Freshpet. It trades about 0.08 of its potential returns per unit of risk. Freshpet is currently generating about -0.18 per unit of risk. If you would invest  171.00  in UMC Electronics Co on December 20, 2024 and sell it today you would earn a total of  20.00  from holding UMC Electronics Co or generate 11.7% return on investment over 90 days.

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

UMC Electronics Co  vs.  Freshpet

UMC Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UMC Electronics Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, UMC Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Freshpet

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freshpet 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.

Pair Trading with UMC Electronics and Freshpet

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

The idea behind UMC Electronics Co and Freshpet 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.