Correlation Between WT Microelectronics and Lung Hwa
Can any of the company-specific risk be diversified away by investing in both WT Microelectronics and Lung Hwa 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 WT Microelectronics and Lung Hwa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WT Microelectronics Co and Lung Hwa Electronics, you can compare the effects of market volatilities on WT Microelectronics and Lung Hwa 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 WT Microelectronics with a short position of Lung Hwa. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT Microelectronics and Lung Hwa.
Diversification Opportunities for WT Microelectronics and Lung Hwa
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between 3036A and Lung is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding WT Microelectronics Co and Lung Hwa Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lung Hwa Electronics and WT Microelectronics 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 WT Microelectronics Co are associated (or correlated) with Lung Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lung Hwa Electronics has no effect on the direction of WT Microelectronics i.e., WT Microelectronics and Lung Hwa go up and down completely randomly.
Pair Corralation between WT Microelectronics and Lung Hwa
Assuming the 90 days trading horizon WT Microelectronics is expected to generate 20.43 times less return on investment than Lung Hwa. But when comparing it to its historical volatility, WT Microelectronics Co is 10.24 times less risky than Lung Hwa. It trades about 0.05 of its potential returns per unit of risk. Lung Hwa Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,050 in Lung Hwa Electronics on September 3, 2024 and sell it today you would earn a total of 5,370 from holding Lung Hwa Electronics or generate 261.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
WT Microelectronics Co vs. Lung Hwa Electronics
Performance |
| Timeline |
| WT Microelectronics |
| Lung Hwa Electronics |
WT Microelectronics and Lung Hwa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WT Microelectronics and Lung Hwa
The main advantage of trading using opposite WT Microelectronics and Lung Hwa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Microelectronics position performs unexpectedly, Lung Hwa 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 Lung Hwa will offset losses from the drop in Lung Hwa's long position.The idea behind WT Microelectronics Co and Lung Hwa Electronics 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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