Correlation Between GlobalWafers and Higher Way

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

By analyzing existing cross correlation between GlobalWafers Co and Higher Way Electronic, you can compare the effects of market volatilities on GlobalWafers and Higher Way 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 GlobalWafers with a short position of Higher Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlobalWafers and Higher Way.

Diversification Opportunities for GlobalWafers and Higher Way

-0.1

Correlation Coefficient

GlobalWafers  Higher Way

Good diversification

The 3 months correlation between GlobalWafers and Higher is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Higher Way Electronic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Higher Way Electronic and GlobalWafers 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 GlobalWafers Co are associated (or correlated) with Higher Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Higher Way Electronic has no effect on the direction of GlobalWafers i.e., GlobalWafers and Higher Way go up and down completely randomly.

Pair Corralation between GlobalWafers and Higher Way

Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the Higher Way. But the stock apears to be less risky and, when comparing its historical volatility, GlobalWafers Co is 1.71 times less risky than Higher Way. The stock trades about -0.08 of its potential returns per unit of risk. The Higher Way Electronic is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,910  in Higher Way Electronic on September 14, 2024 and sell it today you would lose (530.00) from holding Higher Way Electronic or give up 18.21% of portfolio value over 90 days.

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

GlobalWafers Co  vs.  Higher Way Electronic

GlobalWafers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalWafers Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Higher Way Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Higher Way Electronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Higher Way 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 GlobalWafers and Higher Way

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

The idea behind GlobalWafers Co and Higher Way Electronic 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.