Correlation Between Walsin Lihwa and Taiwan Sanyo

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

Diversification Opportunities for Walsin Lihwa and Taiwan Sanyo

0.91

Correlation Coefficient

Walsin Lihwa  Taiwan Sanyo

Almost no diversification

The 3 months correlation between Walsin and Taiwan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Lihwa Corp and Taiwan Sanyo Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Sanyo Electric 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 Taiwan Sanyo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Sanyo Electric has no effect on the direction of Walsin Lihwa i.e., Walsin Lihwa and Taiwan Sanyo go up and down completely randomly.

Pair Corralation between Walsin Lihwa and Taiwan Sanyo

Assuming the 90 days trading horizon Walsin Lihwa Corp is expected to under-perform the Taiwan Sanyo. In addition to that, Walsin Lihwa is 1.47 times more volatile than Taiwan Sanyo Electric. It trades about -0.09 of its total potential returns per unit of risk. Taiwan Sanyo Electric is currently generating about 0.01 per unit of volatility. If you would invest  3,875  in Taiwan Sanyo Electric on September 15, 2024 and sell it today you would lose (5.00) from holding Taiwan Sanyo Electric or give up 0.13% of portfolio value over 90 days.

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

Walsin Lihwa Corp  vs.  Taiwan Sanyo Electric

Walsin Lihwa Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walsin Lihwa Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Sanyo Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Sanyo Electric has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Sanyo 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 Taiwan Sanyo

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

The idea behind Walsin Lihwa Corp and Taiwan Sanyo Electric 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.