Correlation Between Wafer Works and Delta Electronics

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Can any of the company-specific risk be diversified away by investing in both Wafer Works and Delta Electronics 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 Wafer Works and Delta Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wafer Works and Delta Electronics, you can compare the effects of market volatilities on Wafer Works and Delta Electronics 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 Wafer Works with a short position of Delta Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wafer Works and Delta Electronics.

Diversification Opportunities for Wafer Works and Delta Electronics

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Wafer and Delta is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and Delta Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Electronics and Wafer Works 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 Wafer Works are associated (or correlated) with Delta Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Electronics has no effect on the direction of Wafer Works i.e., Wafer Works and Delta Electronics go up and down completely randomly.

Pair Corralation between Wafer Works and Delta Electronics

Assuming the 90 days trading horizon Wafer Works is expected to under-perform the Delta Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Wafer Works is 1.13 times less risky than Delta Electronics. The stock trades about -0.05 of its potential returns per unit of risk. The Delta Electronics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  36,250  in Delta Electronics on September 9, 2024 and sell it today you would earn a total of  3,650  from holding Delta Electronics or generate 10.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wafer Works  vs.  Delta Electronics

 Performance 
       Timeline  
Wafer Works 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Delta Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Delta Electronics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wafer Works and Delta Electronics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wafer Works and Delta Electronics

The main advantage of trading using opposite Wafer Works and Delta Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wafer Works position performs unexpectedly, Delta Electronics 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 Delta Electronics will offset losses from the drop in Delta Electronics' long position.
The idea behind Wafer Works and Delta Electronics 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.
Check out your portfolio center.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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