Correlation Between Chicony Electronics and WPG Holdings
Can any of the company-specific risk be diversified away by investing in both Chicony Electronics and WPG Holdings 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 Chicony Electronics and WPG Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chicony Electronics Co and WPG Holdings, you can compare the effects of market volatilities on Chicony Electronics and WPG Holdings 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 Chicony Electronics with a short position of WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chicony Electronics and WPG Holdings.
Diversification Opportunities for Chicony Electronics and WPG Holdings
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chicony and WPG is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chicony Electronics Co and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings and Chicony 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 Chicony Electronics Co are associated (or correlated) with WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Chicony Electronics i.e., Chicony Electronics and WPG Holdings go up and down completely randomly.
Pair Corralation between Chicony Electronics and WPG Holdings
Assuming the 90 days trading horizon Chicony Electronics Co is expected to generate 1.12 times more return on investment than WPG Holdings. However, Chicony Electronics is 1.12 times more volatile than WPG Holdings. It trades about -0.03 of its potential returns per unit of risk. WPG Holdings is currently generating about -0.06 per unit of risk. If you would invest 16,500 in Chicony Electronics Co on November 2, 2024 and sell it today you would lose (1,200) from holding Chicony Electronics Co or give up 7.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chicony Electronics Co vs. WPG Holdings
Performance |
| Timeline |
| Chicony Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| WPG Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Chicony Electronics and WPG Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chicony Electronics and WPG Holdings
The main advantage of trading using opposite Chicony Electronics and WPG Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chicony Electronics position performs unexpectedly, WPG Holdings 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 WPG Holdings will offset losses from the drop in WPG Holdings' long position.The idea behind Chicony Electronics Co and WPG Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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