Correlation Between WiseChip Semiconductor and Kaulin Mfg

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

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

Diversification Opportunities for WiseChip Semiconductor and Kaulin Mfg

-0.7

Correlation Coefficient

WiseChip Semiconductor  Kaulin Mfg

Excellent diversification

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

Pair Corralation between WiseChip Semiconductor and Kaulin Mfg

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to under-perform the Kaulin Mfg. But the stock apears to be less risky and, when comparing its historical volatility, WiseChip Semiconductor is 1.18 times less risky than Kaulin Mfg. The stock trades about -0.02 of its potential returns per unit of risk. The Kaulin Mfg is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,375  in Kaulin Mfg on September 7, 2024 and sell it today you would earn a total of  230.00  from holding Kaulin Mfg or generate 16.73% return on investment over 90 days.

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

WiseChip Semiconductor  vs.  Kaulin Mfg

WiseChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kaulin Mfg

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kaulin Mfg are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kaulin Mfg showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WiseChip Semiconductor and Kaulin Mfg

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

The idea behind WiseChip Semiconductor and Kaulin Mfg 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.