Correlation Between U Ming and Powertech Industrial

Can any of the company-specific risk be diversified away by investing in both U Ming and Powertech Industrial 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 Powertech Industrial 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 Powertech Industrial Co, you can compare the effects of market volatilities on U Ming and Powertech Industrial 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 Powertech Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Ming and Powertech Industrial.

Diversification Opportunities for U Ming and Powertech Industrial

0.58

Correlation Coefficient

U Ming  Powertech Industrial

Very weak diversification

The 3 months correlation between 2606 and Powertech is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding U Ming Marine Transport and Powertech Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powertech Industrial 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 Powertech Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powertech Industrial has no effect on the direction of U Ming i.e., U Ming and Powertech Industrial go up and down completely randomly.

Pair Corralation between U Ming and Powertech Industrial

Assuming the 90 days trading horizon U Ming Marine Transport is expected to under-perform the Powertech Industrial. But the stock apears to be less risky and, when comparing its historical volatility, U Ming Marine Transport is 2.03 times less risky than Powertech Industrial. The stock trades about -0.06 of its potential returns per unit of risk. The Powertech Industrial Co is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  2,700  in Powertech Industrial Co on September 12, 2024 and sell it today you would earn a total of  435.00  from holding Powertech Industrial Co or generate 16.11% return on investment over 90 days.

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

U Ming Marine Transport  vs.  Powertech Industrial Co

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.

Powertech Industrial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Powertech Industrial Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Powertech Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with U Ming and Powertech Industrial

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

The idea behind U Ming Marine Transport and Powertech Industrial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.