Correlation Between Winbond Electronics and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both Winbond Electronics and Cheng Mei 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 Cheng Mei 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 Cheng Mei Materials, you can compare the effects of market volatilities on Winbond Electronics and Cheng Mei 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 Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Winbond Electronics and Cheng Mei.
Diversification Opportunities for Winbond Electronics and Cheng Mei
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Winbond and Cheng is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Winbond Electronics Corp and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials 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 Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Winbond Electronics i.e., Winbond Electronics and Cheng Mei go up and down completely randomly.
Pair Corralation between Winbond Electronics and Cheng Mei
Assuming the 90 days trading horizon Winbond Electronics Corp is expected to under-perform the Cheng Mei. In addition to that, Winbond Electronics is 1.23 times more volatile than Cheng Mei Materials. It trades about -0.4 of its total potential returns per unit of risk. Cheng Mei Materials is currently generating about -0.01 per unit of volatility. If you would invest 1,290 in Cheng Mei Materials on September 3, 2024 and sell it today you would lose (10.00) from holding Cheng Mei Materials or give up 0.78% 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. Cheng Mei Materials
Performance |
| Timeline |
| Winbond Electronics Corp |
| Cheng Mei Materials |
Winbond Electronics and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Winbond Electronics and Cheng Mei
The main advantage of trading using opposite Winbond Electronics and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Winbond Electronics position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei'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 |
| Cheng Mei vs. Taiwan Semiconductor Manufacturing | Cheng Mei vs. Yang Ming Marine | Cheng Mei vs. ASE Industrial Holding | Cheng Mei 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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