Correlation Between Valens and United Microelectronics

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

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

Diversification Opportunities for Valens and United Microelectronics

0.42

Correlation Coefficient

Valens  United Microelectronics

Very weak diversification

The 3 months correlation between Valens and United is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Valens and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Valens 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 Valens are associated (or correlated) with United Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Microelectronics has no effect on the direction of Valens i.e., Valens and United Microelectronics go up and down completely randomly.

Pair Corralation between Valens and United Microelectronics

Considering the 90-day investment horizon Valens is expected to generate 2.68 times more return on investment than United Microelectronics. However, Valens is 2.68 times more volatile than United Microelectronics. It trades about 0.04 of its potential returns per unit of risk. United Microelectronics is currently generating about -0.25 per unit of risk. If you would invest  195.00  in Valens on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Valens or generate 4.1% return on investment over 90 days.

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

Valens  vs.  United Microelectronics

Valens

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Valens may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Microelectronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Valens and United Microelectronics

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

The idea behind Valens and United Microelectronics 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.