Correlation Between Wafer Works and Liton Technology

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

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

Diversification Opportunities for Wafer Works and Liton Technology

-0.44

Correlation Coefficient

Wafer Works  Liton Technology

Very good diversification

The 3 months correlation between Wafer and Liton is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and Liton Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liton Technology 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 Liton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liton Technology has no effect on the direction of Wafer Works i.e., Wafer Works and Liton Technology go up and down completely randomly.

Pair Corralation between Wafer Works and Liton Technology

Assuming the 90 days trading horizon Wafer Works is expected to under-perform the Liton Technology. But the stock apears to be less risky and, when comparing its historical volatility, Wafer Works is 1.39 times less risky than Liton Technology. The stock trades about -0.14 of its potential returns per unit of risk. The Liton Technology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,685  in Liton Technology on September 14, 2024 and sell it today you would earn a total of  340.00  from holding Liton Technology or generate 9.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Wafer Works  vs.  Liton Technology

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.

Liton Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Liton Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Liton Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wafer Works and Liton Technology

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

The idea behind Wafer Works and Liton Technology 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.