Correlation Between Winbond Electronics and Nanya Technology

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

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

Diversification Opportunities for Winbond Electronics and Nanya Technology

0.92

Correlation Coefficient

Winbond Electronics  Nanya Technology

Almost no diversification

The 3 months correlation between Winbond and Nanya is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Winbond Electronics Corp and Nanya Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nanya Technology Corp and Winbond Electronics 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 Winbond Electronics Corp are associated (or correlated) with Nanya Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nanya Technology Corp has no effect on the direction of Winbond Electronics i.e., Winbond Electronics and Nanya Technology go up and down completely randomly.

Pair Corralation between Winbond Electronics and Nanya Technology

Assuming the 90 days trading horizon Winbond Electronics is expected to generate 1.44 times less return on investment than Nanya Technology. But when comparing it to its historical volatility, Winbond Electronics Corp is 1.4 times less risky than Nanya Technology. It trades about 0.14 of its potential returns per unit of risk. Nanya Technology Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,975  in Nanya Technology Corp on December 30, 2024 and sell it today you would earn a total of  1,055  from holding Nanya Technology Corp or generate 35.46% return on investment over 90 days.

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

Winbond Electronics Corp  vs.  Nanya Technology Corp

Winbond Electronics Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Winbond Electronics Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Winbond Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Nanya Technology Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nanya Technology Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Nanya Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Winbond Electronics and Nanya Technology

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

The idea behind Winbond Electronics Corp and Nanya Technology 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.