Correlation Between Solid State and Wistron Information

Can any of the company-specific risk be diversified away by investing in both Solid State and Wistron Information 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 Solid State and Wistron Information into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Solid State System and Wistron Information Technology, you can compare the effects of market volatilities on Solid State and Wistron Information 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 Solid State with a short position of Wistron Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solid State and Wistron Information.

Diversification Opportunities for Solid State and Wistron Information

0.64

Correlation Coefficient

Solid State  Wistron Information

Poor diversification

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

Pair Corralation between Solid State and Wistron Information

Assuming the 90 days trading horizon Solid State System is expected to under-perform the Wistron Information. In addition to that, Solid State is 1.5 times more volatile than Wistron Information Technology. It trades about -0.03 of its total potential returns per unit of risk. Wistron Information Technology is currently generating about -0.04 per unit of volatility. If you would invest  11,500  in Wistron Information Technology on September 2, 2024 and sell it today you would lose (450.00) from holding Wistron Information Technology or give up 3.91% of portfolio value over 90 days.

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

Solid State System  vs.  Wistron Information Technology

Solid State System

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wistron Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wistron Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wistron Information 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 Solid State and Wistron Information

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

The idea behind Solid State System and Wistron Information Technology 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.