Correlation Between GlobalWafers and King Chou
Can any of the company-specific risk be diversified away by investing in both GlobalWafers and King Chou 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 GlobalWafers and King Chou into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlobalWafers Co and King Chou Marine, you can compare the effects of market volatilities on GlobalWafers and King Chou 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 GlobalWafers with a short position of King Chou. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlobalWafers and King Chou.
Diversification Opportunities for GlobalWafers and King Chou
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between GlobalWafers and King is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and King Chou Marine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on King Chou Marine and GlobalWafers 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 GlobalWafers Co are associated (or correlated) with King Chou. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of King Chou Marine has no effect on the direction of GlobalWafers i.e., GlobalWafers and King Chou go up and down completely randomly.
Pair Corralation between GlobalWafers and King Chou
Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the King Chou. In addition to that, GlobalWafers is 4.47 times more volatile than King Chou Marine. It trades about -0.33 of its total potential returns per unit of risk. King Chou Marine is currently generating about 0.49 per unit of volatility. If you would invest 4,055 in King Chou Marine on November 2, 2024 and sell it today you would earn a total of 125.00 from holding King Chou Marine or generate 3.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlobalWafers Co vs. King Chou Marine
Performance |
| Timeline |
| GlobalWafers |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| King Chou Marine |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
GlobalWafers and King Chou Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlobalWafers and King Chou
The main advantage of trading using opposite GlobalWafers and King Chou positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlobalWafers position performs unexpectedly, King Chou 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 King Chou will offset losses from the drop in King Chou's long position.The idea behind GlobalWafers Co and King Chou Marine 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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