Correlation Between Acer and Wistron Corp

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

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

Diversification Opportunities for Acer and Wistron Corp

0.44

Correlation Coefficient

Acer  Wistron Corp

Very weak diversification

The 3 months correlation between Acer and Wistron is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Acer Inc and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp and Acer 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 Acer Inc are associated (or correlated) with Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Acer i.e., Acer and Wistron Corp go up and down completely randomly.

Pair Corralation between Acer and Wistron Corp

Assuming the 90 days trading horizon Acer Inc is expected to generate 0.68 times more return on investment than Wistron Corp. However, Acer Inc is 1.46 times less risky than Wistron Corp. It trades about 0.03 of its potential returns per unit of risk. Wistron Corp is currently generating about 0.0 per unit of risk. If you would invest  3,845  in Acer Inc on December 2, 2024 and sell it today you would earn a total of  70.00  from holding Acer Inc or generate 1.82% return on investment over 90 days.

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

Acer Inc  vs.  Wistron Corp

Acer Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acer Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Acer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wistron Corp

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Acer Inc and Wistron 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.