Correlation Between Weltrend Semiconductor and E Lead
Can any of the company-specific risk be diversified away by investing in both Weltrend Semiconductor and E Lead 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 E Lead into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Weltrend Semiconductor and E Lead Electronic Co, you can compare the effects of market volatilities on Weltrend Semiconductor and E Lead 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 E Lead. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weltrend Semiconductor and E Lead.
Diversification Opportunities for Weltrend Semiconductor and E Lead
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Weltrend and 2497 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Weltrend Semiconductor and E Lead Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E Lead Electronic 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 E Lead. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E Lead Electronic has no effect on the direction of Weltrend Semiconductor i.e., Weltrend Semiconductor and E Lead go up and down completely randomly.
Pair Corralation between Weltrend Semiconductor and E Lead
Assuming the 90 days trading horizon Weltrend Semiconductor is expected to generate 1.41 times more return on investment than E Lead. However, Weltrend Semiconductor is 1.41 times more volatile than E Lead Electronic Co. It trades about 0.02 of its potential returns per unit of risk. E Lead Electronic Co is currently generating about -0.09 per unit of risk. If you would invest 5,490 in Weltrend Semiconductor on October 25, 2024 and sell it today you would earn a total of 20.00 from holding Weltrend Semiconductor or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Weltrend Semiconductor vs. E Lead Electronic Co
Performance |
| Timeline |
| Weltrend Semiconductor |
| E Lead Electronic |
Weltrend Semiconductor and E Lead Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Weltrend Semiconductor and E Lead
The main advantage of trading using opposite Weltrend Semiconductor and E Lead positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weltrend Semiconductor position performs unexpectedly, E Lead 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 E Lead will offset losses from the drop in E Lead's long position.The idea behind Weltrend Semiconductor and E Lead Electronic Co 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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