Correlation Between Unisem SA and Electromagnetica

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

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

Diversification Opportunities for Unisem SA and Electromagnetica

-0.37

Correlation Coefficient

Unisem SA  Electromagnetica

Very good diversification

The 3 months correlation between Unisem and Electromagnetica is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Unisem SA and Electromagnetica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electromagnetica and Unisem SA 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 Unisem SA are associated (or correlated) with Electromagnetica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electromagnetica has no effect on the direction of Unisem SA i.e., Unisem SA and Electromagnetica go up and down completely randomly.

Pair Corralation between Unisem SA and Electromagnetica

Assuming the 90 days trading horizon Unisem SA is expected to generate 0.96 times more return on investment than Electromagnetica. However, Unisem SA is 1.05 times less risky than Electromagnetica. It trades about 0.15 of its potential returns per unit of risk. Electromagnetica SA is currently generating about 0.06 per unit of risk. If you would invest  32.00  in Unisem SA on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Unisem SA or generate 31.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Unisem SA  vs.  Electromagnetica SA

Unisem SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unisem SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Unisem SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Electromagnetica

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Electromagnetica SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Electromagnetica displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unisem SA and Electromagnetica

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

The idea behind Unisem SA and Electromagnetica SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.