Correlation Between U Ming and Quanta Computer

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

By analyzing existing cross correlation between U Ming Marine Transport and Quanta Computer, you can compare the effects of market volatilities on U Ming and Quanta Computer 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 U Ming with a short position of Quanta Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Quanta Computer.

Diversification Opportunities for U Ming and Quanta Computer

0.6

Correlation Coefficient

U Ming  Quanta Computer

Poor diversification

The 3 months correlation between 2606 and Quanta is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Quanta Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Computer and U Ming 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 U Ming Marine Transport are associated (or correlated) with Quanta Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Computer has no effect on the direction of U Ming i.e., U Ming and Quanta Computer go up and down completely randomly.

Pair Corralation between U Ming and Quanta Computer

Assuming the 90 days trading horizon U Ming is expected to generate 3.28 times less return on investment than Quanta Computer. But when comparing it to its historical volatility, U Ming Marine Transport is 1.35 times less risky than Quanta Computer. It trades about 0.03 of its potential returns per unit of risk. Quanta Computer is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20,300  in Quanta Computer on September 12, 2024 and sell it today you would earn a total of  9,000  from holding Quanta Computer or generate 44.33% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Quanta Computer

U Ming Marine

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Quanta Computer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quanta Computer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Quanta Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Ming and Quanta Computer

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

The idea behind U Ming Marine Transport and Quanta Computer 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.