Correlation Between Microelectronics and Wholetech System

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

By analyzing existing cross correlation between Microelectronics Technology and Wholetech System Hitech, you can compare the effects of market volatilities on Microelectronics and Wholetech System 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 Microelectronics with a short position of Wholetech System. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microelectronics and Wholetech System.

Diversification Opportunities for Microelectronics and Wholetech System

-0.1

Correlation Coefficient

Microelectronics  Wholetech System

Good diversification

The 3 months correlation between Microelectronics and Wholetech is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Microelectronics Technology and Wholetech System Hitech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wholetech System Hitech and Microelectronics 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 Microelectronics Technology are associated (or correlated) with Wholetech System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wholetech System Hitech has no effect on the direction of Microelectronics i.e., Microelectronics and Wholetech System go up and down completely randomly.

Pair Corralation between Microelectronics and Wholetech System

Assuming the 90 days trading horizon Microelectronics Technology is expected to generate 1.34 times more return on investment than Wholetech System. However, Microelectronics is 1.34 times more volatile than Wholetech System Hitech. It trades about 0.09 of its potential returns per unit of risk. Wholetech System Hitech is currently generating about -0.04 per unit of risk. If you would invest  2,960  in Microelectronics Technology on September 23, 2024 and sell it today you would earn a total of  450.00  from holding Microelectronics Technology or generate 15.2% return on investment over 90 days.

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

Microelectronics Technology  vs.  Wholetech System Hitech

Microelectronics Tec

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Microelectronics Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Wholetech System Hitech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wholetech System Hitech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wholetech System 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 Microelectronics and Wholetech System

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

The idea behind Microelectronics Technology and Wholetech System Hitech 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .