Correlation Between GlobalWafers and Motech Industries
Can any of the company-specific risk be diversified away by investing in both GlobalWafers and Motech Industries 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 Motech Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GlobalWafers Co and Motech Industries Co, you can compare the effects of market volatilities on GlobalWafers and Motech Industries 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 Motech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlobalWafers and Motech Industries.
Diversification Opportunities for GlobalWafers and Motech Industries
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GlobalWafers and Motech is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Motech Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motech Industries 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 Motech Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motech Industries has no effect on the direction of GlobalWafers i.e., GlobalWafers and Motech Industries go up and down completely randomly.
Pair Corralation between GlobalWafers and Motech Industries
Assuming the 90 days trading horizon GlobalWafers Co is expected to generate 1.02 times more return on investment than Motech Industries. However, GlobalWafers is 1.02 times more volatile than Motech Industries Co. It trades about -0.04 of its potential returns per unit of risk. Motech Industries Co is currently generating about -0.15 per unit of risk. If you would invest 43,000 in GlobalWafers Co on August 26, 2024 and sell it today you would lose (900.00) from holding GlobalWafers Co or give up 2.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GlobalWafers Co vs. Motech Industries Co
Performance |
| Timeline |
| GlobalWafers |
| Motech Industries |
GlobalWafers and Motech Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GlobalWafers and Motech Industries
The main advantage of trading using opposite GlobalWafers and Motech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GlobalWafers position performs unexpectedly, Motech Industries 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 Motech Industries will offset losses from the drop in Motech Industries' long position.| GlobalWafers vs. WIN Semiconductors | GlobalWafers vs. Sino American Silicon Products | GlobalWafers vs. Novatek Microelectronics Corp | GlobalWafers vs. Yageo Corp |
| Motech Industries vs. United Renewable Energy | Motech Industries vs. Sino American Silicon Products | Motech Industries vs. Wafer Works | Motech Industries vs. Gigasolar Materials |
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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