Correlation Between Weltrend Semiconductor and Walsin Technology
Can any of the company-specific risk be diversified away by investing in both Weltrend Semiconductor and Walsin Technology 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 Weltrend Semiconductor and Walsin Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weltrend Semiconductor and Walsin Technology Corp, you can compare the effects of market volatilities on Weltrend Semiconductor and Walsin Technology 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 Weltrend Semiconductor with a short position of Walsin Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weltrend Semiconductor and Walsin Technology.
Diversification Opportunities for Weltrend Semiconductor and Walsin Technology
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Weltrend and Walsin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Weltrend Semiconductor and Walsin Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walsin Technology Corp and Weltrend Semiconductor 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 Weltrend Semiconductor are associated (or correlated) with Walsin Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walsin Technology Corp has no effect on the direction of Weltrend Semiconductor i.e., Weltrend Semiconductor and Walsin Technology go up and down completely randomly.
Pair Corralation between Weltrend Semiconductor and Walsin Technology
Assuming the 90 days trading horizon Weltrend Semiconductor is expected to under-perform the Walsin Technology. But the stock apears to be less risky and, when comparing its historical volatility, Weltrend Semiconductor is 1.01 times less risky than Walsin Technology. The stock trades about -0.34 of its potential returns per unit of risk. The Walsin Technology Corp is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest 10,250 in Walsin Technology Corp on August 30, 2024 and sell it today you would lose (960.00) from holding Walsin Technology Corp or give up 9.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Weltrend Semiconductor vs. Walsin Technology Corp
Performance |
| Timeline |
| Weltrend Semiconductor |
| Walsin Technology Corp |
Weltrend Semiconductor and Walsin Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weltrend Semiconductor and Walsin Technology
The main advantage of trading using opposite Weltrend Semiconductor and Walsin Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weltrend Semiconductor position performs unexpectedly, Walsin Technology 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 Technology will offset losses from the drop in Walsin Technology's long position.The idea behind Weltrend Semiconductor and Walsin Technology 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.
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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