Correlation Between WT Microelectronics and C Tech

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

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

Diversification Opportunities for WT Microelectronics and C Tech

0.64

Correlation Coefficient

WT Microelectronics  C Tech

Poor diversification

The 3 months correlation between 3036A and 3625 is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WT Microelectronics Co and C Tech United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C Tech United and WT Microelectronics 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 WT Microelectronics Co are associated (or correlated) with C Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C Tech United has no effect on the direction of WT Microelectronics i.e., WT Microelectronics and C Tech go up and down completely randomly.

Pair Corralation between WT Microelectronics and C Tech

Assuming the 90 days trading horizon WT Microelectronics is expected to generate 8.54 times less return on investment than C Tech. But when comparing it to its historical volatility, WT Microelectronics Co is 16.79 times less risky than C Tech. It trades about 0.31 of its potential returns per unit of risk. C Tech United is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,230  in C Tech United on September 12, 2024 and sell it today you would earn a total of  545.00  from holding C Tech United or generate 44.31% return on investment over 90 days.

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

WT Microelectronics Co  vs.  C Tech United

WT Microelectronics

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WT Microelectronics Co are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WT Microelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

C Tech United

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in C Tech United are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, C Tech showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WT Microelectronics and C Tech

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

The idea behind WT Microelectronics Co and C Tech United 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.