Correlation Between Winbond Electronics and Ares International

Can any of the company-specific risk be diversified away by investing in both Winbond Electronics and Ares International 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 Winbond Electronics and Ares International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Winbond Electronics Corp and Ares International Corp, you can compare the effects of market volatilities on Winbond Electronics and Ares International 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 Winbond Electronics with a short position of Ares International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Winbond Electronics and Ares International.

Diversification Opportunities for Winbond Electronics and Ares International

0.87

Correlation Coefficient

Winbond Electronics  Ares International

Very poor diversification

The 3 months correlation between Winbond and Ares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Winbond Electronics Corp and Ares International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares International Corp and Winbond Electronics 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 Winbond Electronics Corp are associated (or correlated) with Ares International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares International Corp has no effect on the direction of Winbond Electronics i.e., Winbond Electronics and Ares International go up and down completely randomly.

Pair Corralation between Winbond Electronics and Ares International

Assuming the 90 days trading horizon Winbond Electronics Corp is expected to under-perform the Ares International. In addition to that, Winbond Electronics is 1.64 times more volatile than Ares International Corp. It trades about -0.33 of its total potential returns per unit of risk. Ares International Corp is currently generating about -0.13 per unit of volatility. If you would invest  5,130  in Ares International Corp on September 3, 2024 and sell it today you would lose (430.00) from holding Ares International Corp or give up 8.38% of portfolio value over 90 days.

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

Winbond Electronics Corp  vs.  Ares International Corp

Winbond Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winbond Electronics 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ares International Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ares International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Winbond Electronics and Ares International

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

The idea behind Winbond Electronics Corp and Ares International Corp 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.