Correlation Between Wave Electronics and PI Advanced
Can any of the company-specific risk be diversified away by investing in both Wave Electronics and PI Advanced 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 PI Advanced 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 PI Advanced Materials, you can compare the effects of market volatilities on Wave Electronics and PI Advanced 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 PI Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wave Electronics and PI Advanced.
Diversification Opportunities for Wave Electronics and PI Advanced
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wave and 178920 is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and PI Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PI Advanced Materials 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 PI Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PI Advanced Materials has no effect on the direction of Wave Electronics i.e., Wave Electronics and PI Advanced go up and down completely randomly.
Pair Corralation between Wave Electronics and PI Advanced
Assuming the 90 days trading horizon Wave Electronics Co is expected to under-perform the PI Advanced. But the stock apears to be less risky and, when comparing its historical volatility, Wave Electronics Co is 1.57 times less risky than PI Advanced. The stock trades about -0.04 of its potential returns per unit of risk. The PI Advanced Materials is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,761,000 in PI Advanced Materials on October 26, 2024 and sell it today you would lose (5,000) from holding PI Advanced Materials or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wave Electronics Co vs. PI Advanced Materials
Performance |
| Timeline |
| Wave Electronics |
| PI Advanced Materials |
Wave Electronics and PI Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wave Electronics and PI Advanced
The main advantage of trading using opposite Wave Electronics and PI Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wave Electronics position performs unexpectedly, PI Advanced 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 PI Advanced will offset losses from the drop in PI Advanced's long position.| Wave Electronics vs. Handok Clean Tech | Wave Electronics vs. National Plastic Co | Wave Electronics vs. LG Household Healthcare | Wave Electronics vs. Infinitt Healthcare Co |
| PI Advanced vs. CG Hi Tech | PI Advanced vs. CKH Food Health | PI Advanced vs. Korea Shipbuilding Offshore | PI Advanced vs. GS Retail Co |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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