Correlation Between Lumax International and UPI Semiconductor

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

By analyzing existing cross correlation between Lumax International Corp and uPI Semiconductor Corp, you can compare the effects of market volatilities on Lumax International and UPI Semiconductor 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 Lumax International with a short position of UPI Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumax International and UPI Semiconductor.

Diversification Opportunities for Lumax International and UPI Semiconductor

-0.07

Correlation Coefficient

Lumax International  UPI Semiconductor

Good diversification

The 3 months correlation between Lumax and UPI is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Lumax International Corp and uPI Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on uPI Semiconductor Corp and Lumax International 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 Lumax International Corp are associated (or correlated) with UPI Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of uPI Semiconductor Corp has no effect on the direction of Lumax International i.e., Lumax International and UPI Semiconductor go up and down completely randomly.

Pair Corralation between Lumax International and UPI Semiconductor

Assuming the 90 days trading horizon Lumax International is expected to generate 2.18 times less return on investment than UPI Semiconductor. But when comparing it to its historical volatility, Lumax International Corp is 1.91 times less risky than UPI Semiconductor. It trades about 0.18 of its potential returns per unit of risk. uPI Semiconductor Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  26,350  in uPI Semiconductor Corp on March 12, 2024 and sell it today you would earn a total of  3,500  from holding uPI Semiconductor Corp or generate 13.28% return on investment over 90 days.

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

Lumax International Corp  vs.  uPI Semiconductor Corp

Lumax International Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lumax International Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lumax International showed solid returns over the last few months and may actually be approaching a breakup point.

uPI Semiconductor Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in uPI Semiconductor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, UPI Semiconductor may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Lumax International and UPI Semiconductor

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

The idea behind Lumax International Corp and uPI Semiconductor Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.