Correlation Between UMC Electronics and AIR LIQUIDE

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

Diversification Opportunities for UMC Electronics and AIR LIQUIDE

0.8

Correlation Coefficient

UMC Electronics  AIR LIQUIDE

Very poor diversification

The 3 months correlation between UMC and AIR is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and AIR LIQUIDE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AIR LIQUIDE ADR 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 AIR LIQUIDE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AIR LIQUIDE ADR has no effect on the direction of UMC Electronics i.e., UMC Electronics and AIR LIQUIDE go up and down completely randomly.

Pair Corralation between UMC Electronics and AIR LIQUIDE

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the AIR LIQUIDE. In addition to that, UMC Electronics is 1.5 times more volatile than AIR LIQUIDE ADR. It trades about -0.02 of its total potential returns per unit of risk. AIR LIQUIDE ADR is currently generating about 0.01 per unit of volatility. If you would invest  3,068  in AIR LIQUIDE ADR on October 10, 2024 and sell it today you would lose (8.00) from holding AIR LIQUIDE ADR or give up 0.26% of portfolio value over 90 days.

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

UMC Electronics Co  vs.  AIR LIQUIDE ADR

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 unfluctuating 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.

AIR LIQUIDE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AIR LIQUIDE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with UMC Electronics and AIR LIQUIDE

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

The idea behind UMC Electronics Co and AIR LIQUIDE ADR 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.