Correlation Between Walsin Lihwa and USI Corp

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

By analyzing existing cross correlation between Walsin Lihwa Corp and USI Corp, you can compare the effects of market volatilities on Walsin Lihwa and USI Corp 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 Walsin Lihwa with a short position of USI Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Lihwa and USI Corp.

Diversification Opportunities for Walsin Lihwa and USI Corp

0.8

Correlation Coefficient

Walsin Lihwa  USI Corp

Very poor diversification

The 3 months correlation between Walsin and USI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa Corp and USI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USI Corp and Walsin Lihwa 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 Walsin Lihwa Corp are associated (or correlated) with USI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USI Corp has no effect on the direction of Walsin Lihwa i.e., Walsin Lihwa and USI Corp go up and down completely randomly.

Pair Corralation between Walsin Lihwa and USI Corp

Assuming the 90 days trading horizon Walsin Lihwa Corp is expected to generate 1.08 times more return on investment than USI Corp. However, Walsin Lihwa is 1.08 times more volatile than USI Corp. It trades about 0.24 of its potential returns per unit of risk. USI Corp is currently generating about 0.08 per unit of risk. If you would invest  2,355  in Walsin Lihwa Corp on December 5, 2024 and sell it today you would earn a total of  380.00  from holding Walsin Lihwa Corp or generate 16.14% return on investment over 90 days.

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

Walsin Lihwa Corp  vs.  USI Corp

Walsin Lihwa Corp

Risk-Adjusted Performance

Modest

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

USI Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days USI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, USI Corp 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 Walsin Lihwa and USI Corp

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

The idea behind Walsin Lihwa Corp and USI Corp 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 Stocks Directory module to find actively traded stocks across global markets.