Correlation Between Fortune Electric and Walsin Lihwa
Can any of the company-specific risk be diversified away by investing in both Fortune Electric and Walsin Lihwa 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 Fortune Electric and Walsin Lihwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fortune Electric Co and Walsin Lihwa Corp, you can compare the effects of market volatilities on Fortune Electric and Walsin Lihwa 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 Fortune Electric with a short position of Walsin Lihwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortune Electric and Walsin Lihwa.
Diversification Opportunities for Fortune Electric and Walsin Lihwa
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fortune and Walsin is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Electric Co and Walsin Lihwa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Lihwa Corp and Fortune Electric 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 Fortune Electric Co are associated (or correlated) with Walsin Lihwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Lihwa Corp has no effect on the direction of Fortune Electric i.e., Fortune Electric and Walsin Lihwa go up and down completely randomly.
Pair Corralation between Fortune Electric and Walsin Lihwa
Assuming the 90 days trading horizon Fortune Electric Co is expected to generate 2.12 times more return on investment than Walsin Lihwa. However, Fortune Electric is 2.12 times more volatile than Walsin Lihwa Corp. It trades about 0.11 of its potential returns per unit of risk. Walsin Lihwa Corp is currently generating about 0.23 per unit of risk. If you would invest 54,400 in Fortune Electric Co on November 5, 2024 and sell it today you would earn a total of 2,400 from holding Fortune Electric Co or generate 4.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fortune Electric Co vs. Walsin Lihwa Corp
Performance |
| Timeline |
| Fortune Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Walsin Lihwa Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Fortune Electric and Walsin Lihwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fortune Electric and Walsin Lihwa
The main advantage of trading using opposite Fortune Electric and Walsin Lihwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortune Electric position performs unexpectedly, Walsin Lihwa 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 Walsin Lihwa will offset losses from the drop in Walsin Lihwa's long position.The idea behind Fortune Electric Co and Walsin Lihwa 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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