Correlation Between First Steamship and Universal Microelectronics

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

Diversification Opportunities for First Steamship and Universal Microelectronics

0.18
  Correlation Coefficient

Average diversification

The 3 months correlation between First and Universal is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding First Steamship Co and Universal Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Microelectronics and First Steamship 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 First Steamship Co are associated (or correlated) with Universal Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Microelectronics has no effect on the direction of First Steamship i.e., First Steamship and Universal Microelectronics go up and down completely randomly.

Pair Corralation between First Steamship and Universal Microelectronics

Assuming the 90 days trading horizon First Steamship is expected to generate 5.18 times less return on investment than Universal Microelectronics. But when comparing it to its historical volatility, First Steamship Co is 1.65 times less risky than Universal Microelectronics. It trades about 0.04 of its potential returns per unit of risk. Universal Microelectronics Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Universal Microelectronics Co on September 13, 2024 and sell it today you would earn a total of  580.00  from holding Universal Microelectronics Co or generate 29.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

First Steamship Co  vs.  Universal Microelectronics Co

 Performance 
       Timeline  
First Steamship 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in First Steamship Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Steamship is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Universal Microelectronics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Microelectronics Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Universal Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

First Steamship and Universal Microelectronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with First Steamship and Universal Microelectronics

The main advantage of trading using opposite First Steamship and Universal Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Steamship position performs unexpectedly, Universal 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 Universal Microelectronics will offset losses from the drop in Universal Microelectronics' long position.
The idea behind First Steamship Co and Universal Microelectronics Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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