Correlation Between Chipbond Technology and Wafer Works
Can any of the company-specific risk be diversified away by investing in both Chipbond Technology 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 Chipbond Technology and Wafer Works into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chipbond Technology and Wafer Works, you can compare the effects of market volatilities on Chipbond Technology 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 Chipbond Technology with a short position of Wafer Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chipbond Technology and Wafer Works.
Diversification Opportunities for Chipbond Technology and Wafer Works
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Chipbond and Wafer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chipbond Technology and Wafer Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wafer Works and Chipbond Technology 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 Chipbond Technology 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 Chipbond Technology i.e., Chipbond Technology and Wafer Works go up and down completely randomly.
Pair Corralation between Chipbond Technology and Wafer Works
Assuming the 90 days trading horizon Chipbond Technology is expected to generate 0.85 times more return on investment than Wafer Works. However, Chipbond Technology is 1.18 times less risky than Wafer Works. It trades about 0.02 of its potential returns per unit of risk. Wafer Works is currently generating about -0.04 per unit of risk. If you would invest 5,900 in Chipbond Technology on September 4, 2024 and sell it today you would earn a total of 470.00 from holding Chipbond Technology or generate 7.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chipbond Technology vs. Wafer Works
Performance |
| Timeline |
| Chipbond Technology |
| Wafer Works |
Chipbond Technology and Wafer Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chipbond Technology and Wafer Works
The main advantage of trading using opposite Chipbond Technology and Wafer Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chipbond Technology 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.The idea behind Chipbond Technology and Wafer Works 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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