Correlation Between Walsin Lihwa and Hota Industrial

Can any of the company-specific risk be diversified away by investing in both Walsin Lihwa and Hota Industrial 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 Hota Industrial 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 Hota Industrial Mfg, you can compare the effects of market volatilities on Walsin Lihwa and Hota Industrial 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 Hota Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Lihwa and Hota Industrial.

Diversification Opportunities for Walsin Lihwa and Hota Industrial

0.85

Correlation Coefficient

Walsin Lihwa  Hota Industrial

Very poor diversification

The 3 months correlation between Walsin and Hota is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa Corp and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg 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 Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of Walsin Lihwa i.e., Walsin Lihwa and Hota Industrial go up and down completely randomly.

Pair Corralation between Walsin Lihwa and Hota Industrial

Assuming the 90 days trading horizon Walsin Lihwa is expected to generate 1.55 times less return on investment than Hota Industrial. But when comparing it to its historical volatility, Walsin Lihwa Corp is 1.34 times less risky than Hota Industrial. It trades about 0.06 of its potential returns per unit of risk. Hota Industrial Mfg is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,540  in Hota Industrial Mfg on December 22, 2024 and sell it today you would earn a total of  640.00  from holding Hota Industrial Mfg or generate 9.79% 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.  Hota Industrial Mfg

Walsin Lihwa Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Walsin Lihwa Corp are ranked lower than 4 (%) 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.

Hota Industrial Mfg

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hota Industrial Mfg are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hota Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walsin Lihwa and Hota Industrial

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

The idea behind Walsin Lihwa Corp and Hota Industrial Mfg 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.