Correlation Between Amtran Technology and United Microelectronics

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

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

Diversification Opportunities for Amtran Technology and United Microelectronics

0.65

Correlation Coefficient

Amtran Technology  United Microelectronics

Poor diversification

The 3 months correlation between Amtran and United is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Amtran Technology Co and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Amtran Technology 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 Amtran Technology Co 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 Amtran Technology i.e., Amtran Technology and United Microelectronics go up and down completely randomly.

Pair Corralation between Amtran Technology and United Microelectronics

Assuming the 90 days trading horizon Amtran Technology Co is expected to generate 2.38 times more return on investment than United Microelectronics. However, Amtran Technology is 2.38 times more volatile than United Microelectronics. It trades about 0.18 of its potential returns per unit of risk. United Microelectronics is currently generating about 0.15 per unit of risk. If you would invest  1,490  in Amtran Technology Co on March 4, 2024 and sell it today you would earn a total of  585.00  from holding Amtran Technology Co or generate 39.26% return on investment over 90 days.

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

Amtran Technology Co  vs.  United Microelectronics

Amtran Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Amtran Technology Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Amtran Technology showed solid returns over the last few months and may actually be approaching a breakup point.

United Microelectronics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Microelectronics are ranked lower than 11 (%) 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 July 2024.

Pair Trading with Amtran Technology and United Microelectronics

The main advantage of trading using opposite Amtran Technology and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amtran Technology 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 Amtran Technology Co 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.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.