Correlation Between WIN Semiconductors and Motech Industries

Can any of the company-specific risk be diversified away by investing in both WIN Semiconductors 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 WIN Semiconductors and Motech Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIN Semiconductors and Motech Industries Co, you can compare the effects of market volatilities on WIN Semiconductors 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 WIN Semiconductors with a short position of Motech Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIN Semiconductors and Motech Industries.

Diversification Opportunities for WIN Semiconductors and Motech Industries

0.68

Correlation Coefficient

WIN Semiconductors  Motech Industries

Poor diversification

The 3 months correlation between WIN and Motech is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding WIN Semiconductors and Motech Industries Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motech Industries and WIN Semiconductors 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 WIN Semiconductors 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 WIN Semiconductors i.e., WIN Semiconductors and Motech Industries go up and down completely randomly.

Pair Corralation between WIN Semiconductors and Motech Industries

Assuming the 90 days trading horizon WIN Semiconductors is expected to under-perform the Motech Industries. But the stock apears to be less risky and, when comparing its historical volatility, WIN Semiconductors is 1.3 times less risky than Motech Industries. The stock trades about -0.13 of its potential returns per unit of risk. The Motech Industries Co is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,515  in Motech Industries Co on September 8, 2024 and sell it today you would lose (20.00) from holding Motech Industries Co or give up 0.8% of portfolio value over 90 days.

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

WIN Semiconductors  vs.  Motech Industries Co

WIN Semiconductors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIN Semiconductors 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.

Motech Industries

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Motech Industries Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Motech Industries 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 WIN Semiconductors and Motech Industries

The main advantage of trading using opposite WIN Semiconductors and Motech Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIN Semiconductors 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.

The idea behind WIN Semiconductors and Motech Industries 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.