Correlation Between UMC Electronics and BW OFFSHORE

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

Diversification Opportunities for UMC Electronics and BW OFFSHORE

0.0

Correlation Coefficient

UMC Electronics  BW OFFSHORE

Pay attention - limited upside

The 3 months correlation between UMC and XY81 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of UMC Electronics i.e., UMC Electronics and BW OFFSHORE go up and down completely randomly.

Pair Corralation between UMC Electronics and BW OFFSHORE

Assuming the 90 days horizon UMC Electronics Co is expected to generate 1.33 times more return on investment than BW OFFSHORE. However, UMC Electronics is 1.33 times more volatile than BW OFFSHORE LTD. It trades about 0.08 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about 0.09 per unit of risk. If you would invest  179.00  in UMC Electronics Co on November 19, 2024 and sell it today you would earn a total of  7.00  from holding UMC Electronics Co or generate 3.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

UMC Electronics Co  vs.  BW OFFSHORE LTD

UMC Electronics

Risk-Adjusted Performance

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 nearly stable basic indicators, UMC Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

BW OFFSHORE LTD

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BW OFFSHORE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UMC Electronics and BW OFFSHORE

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

The idea behind UMC Electronics Co and BW OFFSHORE LTD 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.