Correlation Between Wafer Works and Mechema Chemicals
Can any of the company-specific risk be diversified away by investing in both Wafer Works and Mechema Chemicals 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 Wafer Works and Mechema Chemicals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wafer Works and Mechema Chemicals Int, you can compare the effects of market volatilities on Wafer Works and Mechema Chemicals 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 Wafer Works with a short position of Mechema Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wafer Works and Mechema Chemicals.
Diversification Opportunities for Wafer Works and Mechema Chemicals
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wafer and Mechema is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and Mechema Chemicals Int in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mechema Chemicals Int and Wafer Works 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 Wafer Works are associated (or correlated) with Mechema Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mechema Chemicals Int has no effect on the direction of Wafer Works i.e., Wafer Works and Mechema Chemicals go up and down completely randomly.
Pair Corralation between Wafer Works and Mechema Chemicals
Assuming the 90 days trading horizon Wafer Works is expected to generate 0.86 times more return on investment than Mechema Chemicals. However, Wafer Works is 1.16 times less risky than Mechema Chemicals. It trades about -0.03 of its potential returns per unit of risk. Mechema Chemicals Int is currently generating about -0.03 per unit of risk. If you would invest 4,126 in Wafer Works on August 30, 2024 and sell it today you would lose (1,126) from holding Wafer Works or give up 27.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wafer Works vs. Mechema Chemicals Int
Performance |
| Timeline |
| Wafer Works |
| Mechema Chemicals Int |
Wafer Works and Mechema Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wafer Works and Mechema Chemicals
The main advantage of trading using opposite Wafer Works and Mechema Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wafer Works position performs unexpectedly, Mechema Chemicals 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 Mechema Chemicals will offset losses from the drop in Mechema Chemicals' long position.The idea behind Wafer Works and Mechema Chemicals Int 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.| Mechema Chemicals vs. Nantex Industry Co | Mechema Chemicals vs. Chong Hong Construction | Mechema Chemicals vs. Cleanaway Co | Mechema Chemicals vs. Symtek Automation Asia |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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