Correlation Between Innolux Corp and Weltrend Semiconductor

Can any of the company-specific risk be diversified away by investing in both Innolux Corp and Weltrend Semiconductor 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 Innolux Corp and Weltrend Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Innolux Corp and Weltrend Semiconductor

0.65

Correlation Coefficient

Innolux Corp  Weltrend Semiconductor

Poor diversification

The 3 months correlation between Innolux and Weltrend is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Innolux Corp and Weltrend Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weltrend Semiconductor and Innolux Corp 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 Innolux Corp are associated (or correlated) with Weltrend Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weltrend Semiconductor has no effect on the direction of Innolux Corp i.e., Innolux Corp and Weltrend Semiconductor go up and down completely randomly.

Pair Corralation between Innolux Corp and Weltrend Semiconductor

Assuming the 90 days trading horizon Innolux Corp is expected to generate 1.31 times less return on investment than Weltrend Semiconductor. But when comparing it to its historical volatility, Innolux Corp is 1.66 times less risky than Weltrend Semiconductor. It trades about 0.08 of its potential returns per unit of risk. Weltrend Semiconductor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,230  in Weltrend Semiconductor on September 13, 2024 and sell it today you would earn a total of  560.00  from holding Weltrend Semiconductor or generate 10.71% return on investment over 90 days.

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

Innolux Corp  vs.  Weltrend Semiconductor

Innolux Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innolux Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Innolux Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Weltrend Semiconductor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weltrend Semiconductor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Weltrend Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innolux Corp and Weltrend Semiconductor

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

The idea behind Innolux Corp and Weltrend Semiconductor 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.