Correlation Between Wistron Information and Cheng Mei
Can any of the company-specific risk be diversified away by investing in both Wistron Information and Cheng Mei 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 Wistron Information and Cheng Mei into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wistron Information Technology and Cheng Mei Materials, you can compare the effects of market volatilities on Wistron Information and Cheng Mei 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 Wistron Information with a short position of Cheng Mei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wistron Information and Cheng Mei.
Diversification Opportunities for Wistron Information and Cheng Mei
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Wistron and Cheng is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wistron Information Technology and Cheng Mei Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Mei Materials and Wistron Information 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 Wistron Information Technology are associated (or correlated) with Cheng Mei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Mei Materials has no effect on the direction of Wistron Information i.e., Wistron Information and Cheng Mei go up and down completely randomly.
Pair Corralation between Wistron Information and Cheng Mei
Assuming the 90 days trading horizon Wistron Information Technology is expected to under-perform the Cheng Mei. In addition to that, Wistron Information is 3.15 times more volatile than Cheng Mei Materials. It trades about -0.18 of its total potential returns per unit of risk. Cheng Mei Materials is currently generating about 0.4 per unit of volatility. If you would invest 1,315 in Cheng Mei Materials on November 3, 2024 and sell it today you would earn a total of 70.00 from holding Cheng Mei Materials or generate 5.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wistron Information Technology vs. Cheng Mei Materials
Performance |
| Timeline |
| Wistron Information |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cheng Mei Materials |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Wistron Information and Cheng Mei Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wistron Information and Cheng Mei
The main advantage of trading using opposite Wistron Information and Cheng Mei positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wistron Information position performs unexpectedly, Cheng Mei 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 Cheng Mei will offset losses from the drop in Cheng Mei's long position.The idea behind Wistron Information Technology and Cheng Mei Materials 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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