Correlation Between Realtek Semiconductor and Posiflex Technology

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

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

Diversification Opportunities for Realtek Semiconductor and Posiflex Technology

0.5

Correlation Coefficient

Realtek Semiconductor  Posiflex Technology

Very weak diversification

The 3 months correlation between Realtek and Posiflex is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Realtek Semiconductor Corp and Posiflex Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Posiflex Technology and Realtek Semiconductor 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 Realtek Semiconductor Corp are associated (or correlated) with Posiflex Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Posiflex Technology has no effect on the direction of Realtek Semiconductor i.e., Realtek Semiconductor and Posiflex Technology go up and down completely randomly.

Pair Corralation between Realtek Semiconductor and Posiflex Technology

Assuming the 90 days trading horizon Realtek Semiconductor is expected to generate 11.34 times less return on investment than Posiflex Technology. But when comparing it to its historical volatility, Realtek Semiconductor Corp is 1.71 times less risky than Posiflex Technology. It trades about 0.05 of its potential returns per unit of risk. Posiflex Technology is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  19,500  in Posiflex Technology on September 13, 2024 and sell it today you would earn a total of  14,150  from holding Posiflex Technology or generate 72.56% return on investment over 90 days.

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

Realtek Semiconductor Corp  vs.  Posiflex Technology

Realtek Semiconductor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Realtek Semiconductor is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Posiflex Technology

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Posiflex Technology are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Posiflex Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Realtek Semiconductor and Posiflex Technology

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

The idea behind Realtek Semiconductor Corp and Posiflex Technology 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.