Correlation Between King Yuan and Wafer Works
Can any of the company-specific risk be diversified away by investing in both King Yuan and Wafer Works 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 King Yuan and Wafer Works into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between King Yuan Electronics and Wafer Works, you can compare the effects of market volatilities on King Yuan and Wafer Works 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 King Yuan with a short position of Wafer Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Yuan and Wafer Works.
Diversification Opportunities for King Yuan and Wafer Works
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between King and Wafer is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding King Yuan Electronics and Wafer Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wafer Works and King Yuan 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 King Yuan Electronics are associated (or correlated) with Wafer Works. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wafer Works has no effect on the direction of King Yuan i.e., King Yuan and Wafer Works go up and down completely randomly.
Pair Corralation between King Yuan and Wafer Works
Assuming the 90 days trading horizon King Yuan Electronics is expected to generate 1.72 times more return on investment than Wafer Works. However, King Yuan is 1.72 times more volatile than Wafer Works. It trades about 0.11 of its potential returns per unit of risk. Wafer Works is currently generating about -0.04 per unit of risk. If you would invest 3,645 in King Yuan Electronics on September 4, 2024 and sell it today you would earn a total of 9,055 from holding King Yuan Electronics or generate 248.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
King Yuan Electronics vs. Wafer Works
Performance |
| Timeline |
| King Yuan Electronics |
| Wafer Works |
King Yuan and Wafer Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with King Yuan and Wafer Works
The main advantage of trading using opposite King Yuan and Wafer Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if King Yuan position performs unexpectedly, Wafer Works 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 Wafer Works will offset losses from the drop in Wafer Works' long position.| King Yuan vs. Taiwan Semiconductor Manufacturing | King Yuan vs. Yang Ming Marine | King Yuan vs. AU Optronics | King Yuan vs. Innolux Corp |
| Wafer Works vs. Taiwan Semiconductor Manufacturing | Wafer Works vs. Yang Ming Marine | Wafer Works vs. AU Optronics | Wafer Works vs. Innolux Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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