Correlation Between UMC Electronics and Orix Corp

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

Diversification Opportunities for UMC Electronics and Orix Corp

0.49

Correlation Coefficient

UMC Electronics  Orix Corp

Very weak diversification

The 3 months correlation between UMC and Orix is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and Orix Corp Ads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orix Corp Ads 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 Orix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orix Corp Ads has no effect on the direction of UMC Electronics i.e., UMC Electronics and Orix Corp go up and down completely randomly.

Pair Corralation between UMC Electronics and Orix Corp

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the Orix Corp. In addition to that, UMC Electronics is 1.4 times more volatile than Orix Corp Ads. It trades about -0.03 of its total potential returns per unit of risk. Orix Corp Ads is currently generating about 0.05 per unit of volatility. If you would invest  7,096  in Orix Corp Ads on September 3, 2024 and sell it today you would earn a total of  3,304  from holding Orix Corp Ads or generate 46.56% return on investment over 90 days.

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

UMC Electronics Co  vs.  Orix Corp Ads

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Orix Corp Ads

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orix Corp Ads has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Orix Corp 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 Orix Corp

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

The idea behind UMC Electronics Co and Orix Corp Ads 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 Stocks Directory module to find actively traded stocks across global markets.