Correlation Between UMC Electronics and ASURE SOFTWARE

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

Diversification Opportunities for UMC Electronics and ASURE SOFTWARE

-0.7

Correlation Coefficient

UMC Electronics  ASURE SOFTWARE

Excellent diversification

The 3 months correlation between UMC and ASURE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and ASURE SOFTWARE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASURE SOFTWARE 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 ASURE SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASURE SOFTWARE has no effect on the direction of UMC Electronics i.e., UMC Electronics and ASURE SOFTWARE go up and down completely randomly.

Pair Corralation between UMC Electronics and ASURE SOFTWARE

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the ASURE SOFTWARE. In addition to that, UMC Electronics is 1.0 times more volatile than ASURE SOFTWARE. It trades about -0.09 of its total potential returns per unit of risk. ASURE SOFTWARE is currently generating about 0.12 per unit of volatility. If you would invest  745.00  in ASURE SOFTWARE on September 4, 2024 and sell it today you would earn a total of  170.00  from holding ASURE SOFTWARE or generate 22.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

UMC Electronics Co  vs.  ASURE SOFTWARE

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ASURE SOFTWARE

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASURE SOFTWARE are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, ASURE SOFTWARE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UMC Electronics and ASURE SOFTWARE

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

The idea behind UMC Electronics Co and ASURE SOFTWARE 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.