Correlation Between WT Microelectronics and Tai Tung
Can any of the company-specific risk be diversified away by investing in both WT Microelectronics and Tai Tung 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 Tai Tung 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 Tai Tung Communication, you can compare the effects of market volatilities on WT Microelectronics and Tai Tung 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 Tai Tung. Check out your portfolio center. Please also check ongoing floating volatility patterns of WT Microelectronics and Tai Tung.
Diversification Opportunities for WT Microelectronics and Tai Tung
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between 3036A and Tai is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding WT Microelectronics Co and Tai Tung Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tai Tung Communication 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 Tai Tung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tai Tung Communication has no effect on the direction of WT Microelectronics i.e., WT Microelectronics and Tai Tung go up and down completely randomly.
Pair Corralation between WT Microelectronics and Tai Tung
Assuming the 90 days trading horizon WT Microelectronics is expected to generate 8.01 times less return on investment than Tai Tung. But when comparing it to its historical volatility, WT Microelectronics Co is 8.42 times less risky than Tai Tung. It trades about 0.05 of its potential returns per unit of risk. Tai Tung Communication is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,430 in Tai Tung Communication on November 5, 2024 and sell it today you would earn a total of 825.00 from holding Tai Tung Communication or generate 57.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WT Microelectronics Co vs. Tai Tung Communication
Performance |
| Timeline |
| WT Microelectronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
| Tai Tung Communication |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
WT Microelectronics and Tai Tung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WT Microelectronics and Tai Tung
The main advantage of trading using opposite WT Microelectronics and Tai Tung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WT Microelectronics position performs unexpectedly, Tai Tung 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 Tai Tung will offset losses from the drop in Tai Tung's long position.The idea behind WT Microelectronics Co and Tai Tung Communication 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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