Correlation Between UMC Electronics and GMO Internet

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

Diversification Opportunities for UMC Electronics and GMO Internet

-0.72

Correlation Coefficient

UMC Electronics  GMO Internet

Pay attention - limited upside

The 3 months correlation between UMC and GMO is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of UMC Electronics i.e., UMC Electronics and GMO Internet go up and down completely randomly.

Pair Corralation between UMC Electronics and GMO Internet

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the GMO Internet. But the stock apears to be less risky and, when comparing its historical volatility, UMC Electronics Co is 2.87 times less risky than GMO Internet. The stock trades about -0.04 of its potential returns per unit of risk. The GMO Internet is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  386.00  in GMO Internet on October 4, 2024 and sell it today you would earn a total of  1,214  from holding GMO Internet or generate 314.51% 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.  GMO Internet

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.

GMO Internet

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GMO Internet are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UMC Electronics and GMO Internet

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

The idea behind UMC Electronics Co and GMO Internet 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.