Correlation Between Wave Electronics and NEOWIZ HOLDINGS

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

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

Diversification Opportunities for Wave Electronics and NEOWIZ HOLDINGS

-0.59

Correlation Coefficient

Wave Electronics  NEOWIZ HOLDINGS

Excellent diversification

The 3 months correlation between Wave and NEOWIZ is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Wave Electronics Co and NEOWIZ HOLDINGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEOWIZ HOLDINGS and Wave Electronics 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 Wave Electronics Co are associated (or correlated) with NEOWIZ HOLDINGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEOWIZ HOLDINGS has no effect on the direction of Wave Electronics i.e., Wave Electronics and NEOWIZ HOLDINGS go up and down completely randomly.

Pair Corralation between Wave Electronics and NEOWIZ HOLDINGS

Assuming the 90 days trading horizon Wave Electronics Co is expected to generate 0.51 times more return on investment than NEOWIZ HOLDINGS. However, Wave Electronics Co is 1.94 times less risky than NEOWIZ HOLDINGS. It trades about 0.04 of its potential returns per unit of risk. NEOWIZ HOLDINGS is currently generating about -0.02 per unit of risk. If you would invest  375,000  in Wave Electronics Co on December 4, 2024 and sell it today you would earn a total of  13,000  from holding Wave Electronics Co or generate 3.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Wave Electronics Co  vs.  NEOWIZ HOLDINGS

Wave Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wave Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

NEOWIZ HOLDINGS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEOWIZ HOLDINGS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wave Electronics and NEOWIZ HOLDINGS

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

The idea behind Wave Electronics Co and NEOWIZ HOLDINGS 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.