Correlation Between Wistron Information and Acer E

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

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

Diversification Opportunities for Wistron Information and Acer E

0.7

Correlation Coefficient

Wistron Information  Acer E

Poor diversification

The 3 months correlation between Wistron and Acer is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wistron Information Technology and Acer E Enabling Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acer E Enabling and Wistron Information 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 Wistron Information Technology are associated (or correlated) with Acer E. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acer E Enabling has no effect on the direction of Wistron Information i.e., Wistron Information and Acer E go up and down completely randomly.

Pair Corralation between Wistron Information and Acer E

Assuming the 90 days trading horizon Wistron Information Technology is expected to generate 0.95 times more return on investment than Acer E. However, Wistron Information Technology is 1.05 times less risky than Acer E. It trades about -0.04 of its potential returns per unit of risk. Acer E Enabling Service is currently generating about -0.05 per unit of risk. 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

Wistron Information Technology  vs.  Acer E Enabling Service

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.

Acer E Enabling

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Wistron Information Technology and Acer E Enabling Service 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.