Correlation Between TOPMATERIAL and Wireless Power

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

By analyzing existing cross correlation between TOPMATERIAL LTD and Wireless Power Amplifier, you can compare the effects of market volatilities on TOPMATERIAL and Wireless Power 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 TOPMATERIAL with a short position of Wireless Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOPMATERIAL and Wireless Power.

Diversification Opportunities for TOPMATERIAL and Wireless Power

0.92

Correlation Coefficient

TOPMATERIAL  Wireless Power

Almost no diversification

The 3 months correlation between TOPMATERIAL and Wireless is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding TOPMATERIAL LTD and Wireless Power Amplifier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wireless Power Amplifier and TOPMATERIAL 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 TOPMATERIAL LTD are associated (or correlated) with Wireless Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wireless Power Amplifier has no effect on the direction of TOPMATERIAL i.e., TOPMATERIAL and Wireless Power go up and down completely randomly.

Pair Corralation between TOPMATERIAL and Wireless Power

Assuming the 90 days trading horizon TOPMATERIAL LTD is expected to under-perform the Wireless Power. In addition to that, TOPMATERIAL is 1.59 times more volatile than Wireless Power Amplifier. It trades about -0.21 of its total potential returns per unit of risk. Wireless Power Amplifier is currently generating about -0.2 per unit of volatility. If you would invest  242,500  in Wireless Power Amplifier on September 12, 2024 and sell it today you would lose (23,000) from holding Wireless Power Amplifier or give up 9.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

TOPMATERIAL LTD  vs.  Wireless Power Amplifier

TOPMATERIAL LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOPMATERIAL LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Wireless Power Amplifier

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wireless Power Amplifier has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with TOPMATERIAL and Wireless Power

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

The idea behind TOPMATERIAL LTD and Wireless Power Amplifier 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.