Correlation Between Wafer Works and Holy Stone

Can any of the company-specific risk be diversified away by investing in both Wafer Works and Holy Stone 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 Holy Stone into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wafer Works and Holy Stone Enterprise, you can compare the effects of market volatilities on Wafer Works and Holy Stone 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 Holy Stone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wafer Works and Holy Stone.

Diversification Opportunities for Wafer Works and Holy Stone

0.25

Correlation Coefficient

Wafer Works  Holy Stone

Modest diversification

The 3 months correlation between Wafer and Holy is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and Holy Stone Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holy Stone Enterprise 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 Holy Stone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holy Stone Enterprise has no effect on the direction of Wafer Works i.e., Wafer Works and Holy Stone go up and down completely randomly.

Pair Corralation between Wafer Works and Holy Stone

Assuming the 90 days trading horizon Wafer Works is expected to under-perform the Holy Stone. In addition to that, Wafer Works is 2.64 times more volatile than Holy Stone Enterprise. It trades about -0.14 of its total potential returns per unit of risk. Holy Stone Enterprise is currently generating about -0.03 per unit of volatility. If you would invest  8,940  in Holy Stone Enterprise on September 14, 2024 and sell it today you would lose (120.00) from holding Holy Stone Enterprise or give up 1.34% of portfolio value over 90 days.

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

Wafer Works  vs.  Holy Stone Enterprise

Wafer Works

Risk-Adjusted Performance

0 of 100

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 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.

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holy Stone 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 Wafer Works and Holy Stone

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

The idea behind Wafer Works and Holy Stone Enterprise 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.