Correlation Between United Microelectronics and Delta Electronics

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

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

Diversification Opportunities for United Microelectronics and Delta Electronics

0.77

Correlation Coefficient

United Microelectronics  Delta Electronics

Poor diversification

The 3 months correlation between United and Delta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding United Microelectronics and Delta Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics and United Microelectronics 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 United Microelectronics are associated (or correlated) with Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics has no effect on the direction of United Microelectronics i.e., United Microelectronics and Delta Electronics go up and down completely randomly.

Pair Corralation between United Microelectronics and Delta Electronics

Assuming the 90 days trading horizon United Microelectronics is expected to generate 1.32 times less return on investment than Delta Electronics. But when comparing it to its historical volatility, United Microelectronics is 1.87 times less risky than Delta Electronics. It trades about 0.1 of its potential returns per unit of risk. Delta Electronics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  29,250  in Delta Electronics on February 20, 2024 and sell it today you would earn a total of  2,550  from holding Delta Electronics or generate 8.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

United Microelectronics  vs.  Delta Electronics

United Microelectronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Microelectronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, United Microelectronics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Delta Electronics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Delta Electronics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with United Microelectronics and Delta Electronics

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

The idea behind United Microelectronics and Delta Electronics 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.