Correlation Between Taiwan Surface and Unimicron Technology

Can any of the company-specific risk be diversified away by investing in both Taiwan Surface and Unimicron Technology 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 Taiwan Surface and Unimicron Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taiwan Surface Mounting and Unimicron Technology Corp, you can compare the effects of market volatilities on Taiwan Surface and Unimicron Technology 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 Taiwan Surface with a short position of Unimicron Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Surface and Unimicron Technology.

Diversification Opportunities for Taiwan Surface and Unimicron Technology

-0.21

Correlation Coefficient

Taiwan Surface  Unimicron Technology

Very good diversification

The 3 months correlation between Taiwan and Unimicron is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Surface Mounting and Unimicron Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unimicron Technology Corp and Taiwan Surface 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 Taiwan Surface Mounting are associated (or correlated) with Unimicron Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unimicron Technology Corp has no effect on the direction of Taiwan Surface i.e., Taiwan Surface and Unimicron Technology go up and down completely randomly.

Pair Corralation between Taiwan Surface and Unimicron Technology

Assuming the 90 days trading horizon Taiwan Surface Mounting is expected to under-perform the Unimicron Technology. But the stock apears to be less risky and, when comparing its historical volatility, Taiwan Surface Mounting is 1.67 times less risky than Unimicron Technology. The stock trades about -0.13 of its potential returns per unit of risk. The Unimicron Technology Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  16,250  in Unimicron Technology Corp on August 31, 2024 and sell it today you would lose (1,550) from holding Unimicron Technology Corp or give up 9.54% of portfolio value over 90 days.

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

Taiwan Surface Mounting  vs.  Unimicron Technology Corp

Taiwan Surface Mounting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Surface Mounting 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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Unimicron Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unimicron Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Taiwan Surface and Unimicron Technology

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

The idea behind Taiwan Surface Mounting and Unimicron Technology Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.