Correlation Between United Microelectronics and Sporton International

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Can any of the company-specific risk be diversified away by investing in both United Microelectronics and Sporton International 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 Sporton International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Microelectronics and Sporton International, you can compare the effects of market volatilities on United Microelectronics and Sporton International 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 Sporton International. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Microelectronics and Sporton International.

Diversification Opportunities for United Microelectronics and Sporton International

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between United and Sporton is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of United Microelectronics i.e., United Microelectronics and Sporton International go up and down completely randomly.

Pair Corralation between United Microelectronics and Sporton International

Assuming the 90 days trading horizon United Microelectronics is expected to under-perform the Sporton International. But the stock apears to be less risky and, when comparing its historical volatility, United Microelectronics is 1.09 times less risky than Sporton International. The stock trades about -0.33 of its potential returns per unit of risk. The Sporton International is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  21,350  in Sporton International on September 12, 2024 and sell it today you would lose (1,100) from holding Sporton International or give up 5.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

United Microelectronics  vs.  Sporton International

 Performance 
       Timeline  
United Microelectronics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very 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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.
Sporton International 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sporton International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sporton International is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

United Microelectronics and Sporton International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Microelectronics and Sporton International

The main advantage of trading using opposite United Microelectronics and Sporton International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Microelectronics position performs unexpectedly, Sporton International 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 Sporton International will offset losses from the drop in Sporton International's long position.
The idea behind United Microelectronics and Sporton International 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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