Correlation Between UMC Electronics and BURLINGTON STORES

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

Diversification Opportunities for UMC Electronics and BURLINGTON STORES

-0.89

Correlation Coefficient

UMC Electronics  BURLINGTON STORES

Pay attention - limited upside

The 3 months correlation between UMC and BURLINGTON is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and BURLINGTON STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BURLINGTON STORES 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 BURLINGTON STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BURLINGTON STORES has no effect on the direction of UMC Electronics i.e., UMC Electronics and BURLINGTON STORES go up and down completely randomly.

Pair Corralation between UMC Electronics and BURLINGTON STORES

Assuming the 90 days horizon UMC Electronics Co is expected to generate 2.16 times more return on investment than BURLINGTON STORES. However, UMC Electronics is 2.16 times more volatile than BURLINGTON STORES. It trades about 0.14 of its potential returns per unit of risk. BURLINGTON STORES is currently generating about 0.1 per unit of risk. If you would invest  168.00  in UMC Electronics Co on October 23, 2024 and sell it today you would earn a total of  11.00  from holding UMC Electronics Co or generate 6.55% return on investment over 90 days.

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

UMC Electronics Co  vs.  BURLINGTON STORES

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.

BURLINGTON STORES

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BURLINGTON STORES are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, BURLINGTON STORES exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UMC Electronics and BURLINGTON STORES

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

The idea behind UMC Electronics Co and BURLINGTON STORES 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.