Correlation Between CMC Magnetics and United Microelectronics

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

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

Diversification Opportunities for CMC Magnetics and United Microelectronics

0.59

Correlation Coefficient

CMC Magnetics  United Microelectronics

Very weak diversification

The 3 months correlation between CMC and United is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CMC Magnetics Corp and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and CMC Magnetics 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 CMC Magnetics Corp are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of CMC Magnetics i.e., CMC Magnetics and United Microelectronics go up and down completely randomly.

Pair Corralation between CMC Magnetics and United Microelectronics

Assuming the 90 days trading horizon CMC Magnetics Corp is expected to generate 1.06 times more return on investment than United Microelectronics. However, CMC Magnetics is 1.06 times more volatile than United Microelectronics. It trades about -0.05 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.11 per unit of risk. If you would invest  1,160  in CMC Magnetics Corp on September 4, 2024 and sell it today you would lose (20.00) from holding CMC Magnetics Corp or give up 1.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

CMC Magnetics Corp  vs.  United Microelectronics

CMC Magnetics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMC Magnetics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, CMC Magnetics 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

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with CMC Magnetics and United Microelectronics

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

The idea behind CMC Magnetics Corp and United Microelectronics 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.