Correlation Between Motech Industries and Wafer Works
Can any of the company-specific risk be diversified away by investing in both Motech Industries 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 Motech Industries and Wafer Works into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Motech Industries Co and Wafer Works, you can compare the effects of market volatilities on Motech Industries 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 Motech Industries with a short position of Wafer Works. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motech Industries and Wafer Works.
Diversification Opportunities for Motech Industries and Wafer Works
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Motech and Wafer is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Motech Industries Co and Wafer Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wafer Works and Motech Industries 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 Motech Industries Co 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 Motech Industries i.e., Motech Industries and Wafer Works go up and down completely randomly.
Pair Corralation between Motech Industries and Wafer Works
Assuming the 90 days trading horizon Motech Industries Co is expected to generate 1.06 times more return on investment than Wafer Works. However, Motech Industries is 1.06 times more volatile than Wafer Works. It trades about -0.1 of its potential returns per unit of risk. Wafer Works is currently generating about -0.13 per unit of risk. If you would invest 2,855 in Motech Industries Co on October 25, 2024 and sell it today you would lose (795.00) from holding Motech Industries Co or give up 27.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Motech Industries Co vs. Wafer Works
Performance |
| Timeline |
| Motech Industries |
| Wafer Works |
Motech Industries and Wafer Works Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Motech Industries and Wafer Works
The main advantage of trading using opposite Motech Industries and Wafer Works positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motech Industries 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.| Motech Industries vs. United Renewable Energy | Motech Industries vs. TSEC Corp | Motech Industries vs. Gigasolar Materials | Motech Industries vs. Tainergy Tech Co |
| Wafer Works vs. Sino American Silicon Products | Wafer Works vs. GlobalWafers Co | Wafer Works vs. Motech Industries Co | Wafer Works vs. Formosa Sumco Technology |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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