Correlation Between Walsin Lihwa and Advanced Energy

Can any of the company-specific risk be diversified away by investing in both Walsin Lihwa and Advanced Energy 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 Walsin Lihwa and Advanced Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walsin Lihwa Corp and Advanced Energy Solution, you can compare the effects of market volatilities on Walsin Lihwa and Advanced Energy 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 Walsin Lihwa with a short position of Advanced Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Lihwa and Advanced Energy.

Diversification Opportunities for Walsin Lihwa and Advanced Energy

-0.77

Correlation Coefficient

Walsin Lihwa  Advanced Energy

Pay attention - limited upside

The 3 months correlation between Walsin and Advanced is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa Corp and Advanced Energy Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Energy Solution and Walsin Lihwa 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 Walsin Lihwa Corp are associated (or correlated) with Advanced Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Energy Solution has no effect on the direction of Walsin Lihwa i.e., Walsin Lihwa and Advanced Energy go up and down completely randomly.

Pair Corralation between Walsin Lihwa and Advanced Energy

Assuming the 90 days trading horizon Walsin Lihwa Corp is expected to under-perform the Advanced Energy. But the stock apears to be less risky and, when comparing its historical volatility, Walsin Lihwa Corp is 2.12 times less risky than Advanced Energy. The stock trades about -0.25 of its potential returns per unit of risk. The Advanced Energy Solution is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  51,500  in Advanced Energy Solution on September 1, 2024 and sell it today you would earn a total of  36,500  from holding Advanced Energy Solution or generate 70.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Walsin Lihwa Corp  vs.  Advanced Energy Solution

Walsin Lihwa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walsin Lihwa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Advanced Energy Solution

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Energy Solution are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advanced Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walsin Lihwa and Advanced Energy

The main advantage of trading using opposite Walsin Lihwa and Advanced Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walsin Lihwa position performs unexpectedly, Advanced Energy 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 Advanced Energy will offset losses from the drop in Advanced Energy's long position.

The idea behind Walsin Lihwa Corp and Advanced Energy Solution 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.