Correlation Between Wei Chuan and Auras Technology

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

By analyzing existing cross correlation between Wei Chuan Foods and Auras Technology Co, you can compare the effects of market volatilities on Wei Chuan and Auras 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 Wei Chuan with a short position of Auras Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Auras Technology.

Diversification Opportunities for Wei Chuan and Auras Technology

0.59

Correlation Coefficient

Wei Chuan  Auras Technology

Very weak diversification

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

Pair Corralation between Wei Chuan and Auras Technology

Assuming the 90 days trading horizon Wei Chuan Foods is expected to under-perform the Auras Technology. But the stock apears to be less risky and, when comparing its historical volatility, Wei Chuan Foods is 5.81 times less risky than Auras Technology. The stock trades about -0.03 of its potential returns per unit of risk. The Auras Technology Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  15,402  in Auras Technology Co on October 25, 2024 and sell it today you would earn a total of  47,998  from holding Auras Technology Co or generate 311.63% return on investment over 90 days.

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

Wei Chuan Foods  vs.  Auras Technology Co

Wei Chuan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wei Chuan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wei Chuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Auras Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auras Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Auras Technology 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 Wei Chuan and Auras Technology

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

The idea behind Wei Chuan Foods and Auras Technology Co 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.