Correlation Between United Microelectronics and Himax Technologies

Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Himax Technologies 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 United Microelectronics and Himax Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Microelectronics and Himax Technologies, you can compare the effects of market volatilities on United Microelectronics and Himax Technologies 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 United Microelectronics with a short position of Himax Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Himax Technologies.

Diversification Opportunities for United Microelectronics and Himax Technologies

-0.44

Correlation Coefficient

United Microelectronics  Himax Technologies

Very good diversification

The 3 months correlation between United and Himax is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Himax Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Himax Technologies and United Microelectronics 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 United Microelectronics are associated (or correlated) with Himax Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Himax Technologies has no effect on the direction of United Microelectronics i.e., United Microelectronics and Himax Technologies go up and down completely randomly.

Pair Corralation between United Microelectronics and Himax Technologies

Considering the 90-day investment horizon United Microelectronics is expected to generate 12.58 times less return on investment than Himax Technologies. But when comparing it to its historical volatility, United Microelectronics is 3.44 times less risky than Himax Technologies. It trades about 0.01 of its potential returns per unit of risk. Himax Technologies is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  796.00  in Himax Technologies on December 27, 2024 and sell it today you would earn a total of  2.00  from holding Himax Technologies or generate 0.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

United Microelectronics  vs.  Himax Technologies

United Microelectronics

Risk-Adjusted Performance

Weak

Over the last 90 days United Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, United Microelectronics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Himax Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Himax Technologies are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Himax Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Microelectronics and Himax Technologies

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

The idea behind United Microelectronics and Himax Technologies 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.