Correlation Between Gloria Material and Wei Chih

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

By analyzing existing cross correlation between Gloria Material Technology and Wei Chih Steel, you can compare the effects of market volatilities on Gloria Material and Wei Chih 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 Gloria Material with a short position of Wei Chih. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gloria Material and Wei Chih.

Diversification Opportunities for Gloria Material and Wei Chih

0.08

Correlation Coefficient

Gloria Material  Wei Chih

Significant diversification

The 3 months correlation between Gloria and Wei is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Gloria Material Technology and Wei Chih Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chih Steel and Gloria Material 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 Gloria Material Technology are associated (or correlated) with Wei Chih. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chih Steel has no effect on the direction of Gloria Material i.e., Gloria Material and Wei Chih go up and down completely randomly.

Pair Corralation between Gloria Material and Wei Chih

Assuming the 90 days trading horizon Gloria Material Technology is expected to generate 0.65 times more return on investment than Wei Chih. However, Gloria Material Technology is 1.55 times less risky than Wei Chih. It trades about -0.01 of its potential returns per unit of risk. Wei Chih Steel is currently generating about -0.03 per unit of risk. If you would invest  4,780  in Gloria Material Technology on September 3, 2024 and sell it today you would lose (55.00) from holding Gloria Material Technology or give up 1.15% of portfolio value over 90 days.

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

Gloria Material Technology  vs.  Wei Chih Steel

Gloria Material Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wei Chih Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wei Chih Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wei Chih 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 Gloria Material and Wei Chih

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

The idea behind Gloria Material Technology and Wei Chih Steel 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.