Correlation Between Winbond Electronics and Test Research
Can any of the company-specific risk be diversified away by investing in both Winbond Electronics and Test Research 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 Winbond Electronics and Test Research into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Winbond Electronics Corp and Test Research, you can compare the effects of market volatilities on Winbond Electronics and Test Research 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 Winbond Electronics with a short position of Test Research. Check out your portfolio center. Please also check ongoing floating volatility patterns of Winbond Electronics and Test Research.
Diversification Opportunities for Winbond Electronics and Test Research
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Winbond and Test is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Winbond Electronics Corp and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research and Winbond 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 Winbond Electronics Corp are associated (or correlated) with Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of Winbond Electronics i.e., Winbond Electronics and Test Research go up and down completely randomly.
Pair Corralation between Winbond Electronics and Test Research
Assuming the 90 days trading horizon Winbond Electronics Corp is expected to under-perform the Test Research. But the stock apears to be less risky and, when comparing its historical volatility, Winbond Electronics Corp is 1.73 times less risky than Test Research. The stock trades about -0.4 of its potential returns per unit of risk. The Test Research is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 13,050 in Test Research on September 3, 2024 and sell it today you would lose (50.00) from holding Test Research or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Winbond Electronics Corp vs. Test Research
Performance |
| Timeline |
| Winbond Electronics Corp |
| Test Research |
Winbond Electronics and Test Research Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Winbond Electronics and Test Research
The main advantage of trading using opposite Winbond Electronics and Test Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winbond Electronics position performs unexpectedly, Test Research 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 Test Research will offset losses from the drop in Test Research's long position.| Winbond Electronics vs. Macronix International Co | Winbond Electronics vs. United Microelectronics | Winbond Electronics vs. Mosel Vitelic | Winbond Electronics vs. Nanya Technology Corp |
| Test Research vs. Taiwan Semiconductor Manufacturing | Test Research vs. Yang Ming Marine | Test Research vs. ASE Industrial Holding | Test Research vs. AU Optronics |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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