Correlation Between Wave Electronics and Polaris Office
Can any of the company-specific risk be diversified away by investing in both Wave Electronics and Polaris Office 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 Wave Electronics and Polaris Office into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wave Electronics Co and Polaris Office Corp, you can compare the effects of market volatilities on Wave Electronics and Polaris Office 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 Wave Electronics with a short position of Polaris Office. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Electronics and Polaris Office.
Diversification Opportunities for Wave Electronics and Polaris Office
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wave and Polaris is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and Polaris Office Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polaris Office Corp and Wave Electronics 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 Wave Electronics Co are associated (or correlated) with Polaris Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polaris Office Corp has no effect on the direction of Wave Electronics i.e., Wave Electronics and Polaris Office go up and down completely randomly.
Pair Corralation between Wave Electronics and Polaris Office
Assuming the 90 days trading horizon Wave Electronics Co is expected to under-perform the Polaris Office. But the stock apears to be less risky and, when comparing its historical volatility, Wave Electronics Co is 2.18 times less risky than Polaris Office. The stock trades about -0.02 of its potential returns per unit of risk. The Polaris Office Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 207,500 in Polaris Office Corp on September 25, 2024 and sell it today you would earn a total of 362,500 from holding Polaris Office Corp or generate 174.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wave Electronics Co vs. Polaris Office Corp
Performance |
| Timeline |
| Wave Electronics |
| Polaris Office Corp |
Wave Electronics and Polaris Office Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wave Electronics and Polaris Office
The main advantage of trading using opposite Wave Electronics and Polaris Office positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wave Electronics position performs unexpectedly, Polaris Office 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 Polaris Office will offset losses from the drop in Polaris Office's long position.| Wave Electronics vs. Dongsin Engineering Construction | Wave Electronics vs. Doosan Fuel Cell | Wave Electronics vs. Daishin Balance 1 | Wave Electronics vs. Total Soft Bank |
| Polaris Office vs. Dongsin Engineering Construction | Polaris Office vs. Doosan Fuel Cell | Polaris Office vs. Daishin Balance 1 | Polaris Office vs. Total Soft Bank |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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