Correlation Between King Yuan and WT Microelectronics

Can any of the company-specific risk be diversified away by investing in both King Yuan and WT Microelectronics 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 King Yuan and WT Microelectronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Yuan Electronics and WT Microelectronics Co, you can compare the effects of market volatilities on King Yuan and WT Microelectronics 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 King Yuan with a short position of WT Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Yuan and WT Microelectronics.

Diversification Opportunities for King Yuan and WT Microelectronics

0.86

Correlation Coefficient

King Yuan  WT Microelectronics

Very poor diversification

The 3 months correlation between King and 3036 is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding King Yuan Electronics and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics and King Yuan 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 King Yuan Electronics are associated (or correlated) with WT Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Microelectronics has no effect on the direction of King Yuan i.e., King Yuan and WT Microelectronics go up and down completely randomly.

Pair Corralation between King Yuan and WT Microelectronics

Assuming the 90 days trading horizon King Yuan Electronics is expected to under-perform the WT Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, King Yuan Electronics is 1.09 times less risky than WT Microelectronics. The stock trades about -0.29 of its potential returns per unit of risk. The WT Microelectronics Co is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  11,300  in WT Microelectronics Co on September 12, 2024 and sell it today you would lose (650.00) from holding WT Microelectronics Co or give up 5.75% of portfolio value over 90 days.

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

King Yuan Electronics  vs.  WT Microelectronics Co

King Yuan Electronics

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days King Yuan Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, King Yuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WT Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Microelectronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WT Microelectronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with King Yuan and WT Microelectronics

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

The idea behind King Yuan Electronics and WT Microelectronics Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.