Correlation Between U Media and Gemtek Technology

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

By analyzing existing cross correlation between U Media Communications and Gemtek Technology Co, you can compare the effects of market volatilities on U Media and Gemtek 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 U Media with a short position of Gemtek Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of U Media and Gemtek Technology.

Diversification Opportunities for U Media and Gemtek Technology

0.05

Correlation Coefficient

U Media  Gemtek Technology

Significant diversification

The 3 months correlation between 6470 and Gemtek is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding U Media Communications and Gemtek Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemtek Technology and U Media 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 Media Communications are associated (or correlated) with Gemtek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemtek Technology has no effect on the direction of U Media i.e., U Media and Gemtek Technology go up and down completely randomly.

Pair Corralation between U Media and Gemtek Technology

Assuming the 90 days trading horizon U Media Communications is expected to generate 1.01 times more return on investment than Gemtek Technology. However, U Media is 1.01 times more volatile than Gemtek Technology Co. It trades about 0.11 of its potential returns per unit of risk. Gemtek Technology Co is currently generating about -0.05 per unit of risk. If you would invest  4,760  in U Media Communications on September 5, 2024 and sell it today you would earn a total of  590.00  from holding U Media Communications or generate 12.39% return on investment over 90 days.

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

U Media Communications  vs.  Gemtek Technology Co

U Media Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in U Media Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Media showed solid returns over the last few months and may actually be approaching a breakup point.

Gemtek Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gemtek Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Gemtek Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with U Media and Gemtek Technology

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

The idea behind U Media Communications and Gemtek Technology 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.