Correlation Between Summit Materials and United Microelectronics

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

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

Diversification Opportunities for Summit Materials and United Microelectronics

0.44

Correlation Coefficient

Summit Materials  United Microelectronics

Very weak diversification

The 3 months correlation between Summit and United is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and United Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Microelectronics and Summit Materials 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 Summit Materials 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 Summit Materials i.e., Summit Materials and United Microelectronics go up and down completely randomly.

Pair Corralation between Summit Materials and United Microelectronics

Considering the 90-day investment horizon Summit Materials is expected to under-perform the United Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Summit Materials is 1.24 times less risky than United Microelectronics. The stock trades about -0.21 of its potential returns per unit of risk. The United Microelectronics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  800.00  in United Microelectronics on February 4, 2024 and sell it today you would earn a total of  15.00  from holding United Microelectronics or generate 1.88% return on investment over 90 days.

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

Summit Materials  vs.  United Microelectronics

Summit Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

United Microelectronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Microelectronics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, United Microelectronics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Summit Materials and United Microelectronics

The main advantage of trading using opposite Summit Materials and United Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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 Summit Materials 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.