Correlation Between UMC Electronics and TT Electronics

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

Diversification Opportunities for UMC Electronics and TT Electronics

-0.58

Correlation Coefficient

UMC Electronics  TT Electronics

Excellent diversification

The 3 months correlation between UMC and 7TT is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and TT Electronics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TT Electronics PLC 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 TT Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TT Electronics PLC has no effect on the direction of UMC Electronics i.e., UMC Electronics and TT Electronics go up and down completely randomly.

Pair Corralation between UMC Electronics and TT Electronics

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the TT Electronics. But the stock apears to be less risky and, when comparing its historical volatility, UMC Electronics Co is 1.16 times less risky than TT Electronics. The stock trades about -0.06 of its potential returns per unit of risk. The TT Electronics PLC is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  174.00  in TT Electronics PLC on October 22, 2024 and sell it today you would lose (71.00) from holding TT Electronics PLC or give up 40.8% of portfolio value over 90 days.

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

UMC Electronics Co  vs.  TT Electronics PLC

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 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.

TT Electronics PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TT Electronics PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, TT Electronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UMC Electronics and TT Electronics

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

The idea behind UMC Electronics Co and TT Electronics PLC 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.