Correlation Between Integrated Electronic and Wuxi Chemical

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

By analyzing existing cross correlation between Integrated Electronic Systems and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Integrated Electronic and Wuxi Chemical 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 Integrated Electronic with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Integrated Electronic and Wuxi Chemical.

Diversification Opportunities for Integrated Electronic and Wuxi Chemical

0.63

Correlation Coefficient

Integrated Electronic  Wuxi Chemical

Poor diversification

The 3 months correlation between Integrated and Wuxi is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Integrated Electronic Systems and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Integrated Electronic 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 Integrated Electronic Systems are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Integrated Electronic i.e., Integrated Electronic and Wuxi Chemical go up and down completely randomly.

Pair Corralation between Integrated Electronic and Wuxi Chemical

Assuming the 90 days trading horizon Integrated Electronic Systems is expected to under-perform the Wuxi Chemical. In addition to that, Integrated Electronic is 2.65 times more volatile than Wuxi Chemical Equipment. It trades about -0.09 of its total potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about -0.14 per unit of volatility. If you would invest  3,601  in Wuxi Chemical Equipment on October 12, 2024 and sell it today you would lose (215.00) from holding Wuxi Chemical Equipment or give up 5.97% of portfolio value over 90 days.

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

Integrated Electronic Systems  vs.  Wuxi Chemical Equipment

Integrated Electronic

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Electronic Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Integrated Electronic may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Wuxi Chemical Equipment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Integrated Electronic and Wuxi Chemical

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

The idea behind Integrated Electronic Systems and Wuxi Chemical Equipment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.