Correlation Between WiseChip Semiconductor and Choice Development

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

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

Diversification Opportunities for WiseChip Semiconductor and Choice Development

0.24

Correlation Coefficient

WiseChip Semiconductor  Choice Development

Modest diversification

The 3 months correlation between WiseChip and Choice is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding WiseChip Semiconductor and Choice Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Development 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 Choice Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Development has no effect on the direction of WiseChip Semiconductor i.e., WiseChip Semiconductor and Choice Development go up and down completely randomly.

Pair Corralation between WiseChip Semiconductor and Choice Development

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to generate 1.42 times more return on investment than Choice Development. However, WiseChip Semiconductor is 1.42 times more volatile than Choice Development. It trades about 0.07 of its potential returns per unit of risk. Choice Development is currently generating about 0.0 per unit of risk. If you would invest  2,890  in WiseChip Semiconductor on September 5, 2024 and sell it today you would earn a total of  415.00  from holding WiseChip Semiconductor or generate 14.36% return on investment over 90 days.

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

WiseChip Semiconductor  vs.  Choice Development

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Choice Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Choice Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Choice Development 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 WiseChip Semiconductor and Choice Development

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

The idea behind WiseChip Semiconductor and Choice Development 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.