Correlation Between Lite On and Wistron Corp
Can any of the company-specific risk be diversified away by investing in both Lite On and Wistron Corp 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 Lite On and Wistron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lite On Technology Corp and Wistron Corp, you can compare the effects of market volatilities on Lite On and Wistron Corp 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 Lite On with a short position of Wistron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lite On and Wistron Corp.
Diversification Opportunities for Lite On and Wistron Corp
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lite and Wistron is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Lite On Technology Corp and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp and Lite On 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 Lite On Technology Corp are associated (or correlated) with Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Lite On i.e., Lite On and Wistron Corp go up and down completely randomly.
Pair Corralation between Lite On and Wistron Corp
Assuming the 90 days trading horizon Lite On is expected to generate 5.61 times less return on investment than Wistron Corp. But when comparing it to its historical volatility, Lite On Technology Corp is 1.2 times less risky than Wistron Corp. It trades about 0.04 of its potential returns per unit of risk. Wistron Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 11,350 in Wistron Corp on August 28, 2024 and sell it today you would earn a total of 1,100 from holding Wistron Corp or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Lite On Technology Corp vs. Wistron Corp
Performance |
| Timeline |
| Lite On Technology |
| Wistron Corp |
Lite On and Wistron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lite On and Wistron Corp
The main advantage of trading using opposite Lite On and Wistron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lite On position performs unexpectedly, Wistron Corp 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 Wistron Corp will offset losses from the drop in Wistron Corp's long position.| Lite On vs. Compal Electronics | Lite On vs. Delta Electronics | Lite On vs. Quanta Computer | Lite On vs. Inventec Corp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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