Correlation Between Top Union and WinMate Communication
Can any of the company-specific risk be diversified away by investing in both Top Union and WinMate Communication 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 Top Union and WinMate Communication into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Top Union Electronics and WinMate Communication INC, you can compare the effects of market volatilities on Top Union and WinMate Communication 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 Top Union with a short position of WinMate Communication. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Union and WinMate Communication.
Diversification Opportunities for Top Union and WinMate Communication
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Top and WinMate is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and WinMate Communication INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WinMate Communication INC and Top Union 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 Top Union Electronics are associated (or correlated) with WinMate Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WinMate Communication INC has no effect on the direction of Top Union i.e., Top Union and WinMate Communication go up and down completely randomly.
Pair Corralation between Top Union and WinMate Communication
Assuming the 90 days trading horizon Top Union Electronics is expected to generate 0.65 times more return on investment than WinMate Communication. However, Top Union Electronics is 1.53 times less risky than WinMate Communication. It trades about -0.19 of its potential returns per unit of risk. WinMate Communication INC is currently generating about -0.29 per unit of risk. If you would invest 3,230 in Top Union Electronics on November 5, 2024 and sell it today you would lose (105.00) from holding Top Union Electronics or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Top Union Electronics vs. WinMate Communication INC
Performance |
| Timeline |
| Top Union Electronics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| WinMate Communication INC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Top Union and WinMate Communication Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Top Union and WinMate Communication
The main advantage of trading using opposite Top Union and WinMate Communication positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Top Union position performs unexpectedly, WinMate Communication 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 WinMate Communication will offset losses from the drop in WinMate Communication's long position.The idea behind Top Union Electronics and WinMate Communication INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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