Correlation Between UMC Electronics and Sands China

Can any of the company-specific risk be diversified away by investing in both UMC Electronics and Sands China 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 UMC Electronics and Sands China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UMC Electronics Co and Sands China, you can compare the effects of market volatilities on UMC Electronics and Sands China 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 UMC Electronics with a short position of Sands China. Check out your portfolio center. Please also check ongoing floating volatility patterns of UMC Electronics and Sands China.

Diversification Opportunities for UMC Electronics and Sands China

-0.53

Correlation Coefficient

UMC Electronics  Sands China

Excellent diversification

The 3 months correlation between UMC and Sands is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding UMC Electronics Co and Sands China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands China and UMC Electronics 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 UMC Electronics Co are associated (or correlated) with Sands China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands China has no effect on the direction of UMC Electronics i.e., UMC Electronics and Sands China go up and down completely randomly.

Pair Corralation between UMC Electronics and Sands China

Assuming the 90 days horizon UMC Electronics Co is expected to under-perform the Sands China. But the stock apears to be less risky and, when comparing its historical volatility, UMC Electronics Co is 1.21 times less risky than Sands China. The stock trades about 0.0 of its potential returns per unit of risk. The Sands China is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Sands China on September 4, 2024 and sell it today you would lose (3.00) from holding Sands China or give up 1.23% of portfolio value over 90 days.

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

UMC Electronics Co  vs.  Sands China

UMC Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UMC Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sands China

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sands China are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sands China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UMC Electronics and Sands China

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

The idea behind UMC Electronics Co and Sands China 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.

Check out your portfolio center.

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.