Correlation Between Wonderful and Silicon Power
Can any of the company-specific risk be diversified away by investing in both Wonderful and Silicon Power 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 Wonderful and Silicon Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wonderful Hi Tech Co and Silicon Power Computer, you can compare the effects of market volatilities on Wonderful and Silicon Power 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 Wonderful with a short position of Silicon Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wonderful and Silicon Power.
Diversification Opportunities for Wonderful and Silicon Power
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wonderful and Silicon is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Wonderful Hi Tech Co and Silicon Power Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silicon Power Computer and Wonderful 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 Wonderful Hi Tech Co are associated (or correlated) with Silicon Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silicon Power Computer has no effect on the direction of Wonderful i.e., Wonderful and Silicon Power go up and down completely randomly.
Pair Corralation between Wonderful and Silicon Power
Assuming the 90 days trading horizon Wonderful Hi Tech Co is expected to generate 0.89 times more return on investment than Silicon Power. However, Wonderful Hi Tech Co is 1.13 times less risky than Silicon Power. It trades about 0.04 of its potential returns per unit of risk. Silicon Power Computer is currently generating about 0.0 per unit of risk. If you would invest 3,015 in Wonderful Hi Tech Co on November 3, 2024 and sell it today you would earn a total of 475.00 from holding Wonderful Hi Tech Co or generate 15.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wonderful Hi Tech Co vs. Silicon Power Computer
Performance |
| Timeline |
| Wonderful Hi Tech |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Silicon Power Computer |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Wonderful and Silicon Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wonderful and Silicon Power
The main advantage of trading using opposite Wonderful and Silicon Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wonderful position performs unexpectedly, Silicon Power 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 Silicon Power will offset losses from the drop in Silicon Power's long position.The idea behind Wonderful Hi Tech Co and Silicon Power Computer 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |