Correlation Between Everlight Electronics and Winbond Electronics

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

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

Diversification Opportunities for Everlight Electronics and Winbond Electronics

-0.25

Correlation Coefficient

Everlight Electronics  Winbond Electronics

Very good diversification

The 3 months correlation between Everlight and Winbond is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics Co and Winbond Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winbond Electronics Corp and Everlight 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 Everlight Electronics Co are associated (or correlated) with Winbond Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winbond Electronics Corp has no effect on the direction of Everlight Electronics i.e., Everlight Electronics and Winbond Electronics go up and down completely randomly.

Pair Corralation between Everlight Electronics and Winbond Electronics

Assuming the 90 days trading horizon Everlight Electronics is expected to generate 3.08 times less return on investment than Winbond Electronics. But when comparing it to its historical volatility, Everlight Electronics Co is 1.48 times less risky than Winbond Electronics. It trades about 0.06 of its potential returns per unit of risk. Winbond Electronics Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,600  in Winbond Electronics Corp on December 4, 2024 and sell it today you would earn a total of  270.00  from holding Winbond Electronics Corp or generate 16.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.21%
Values	Daily Returns

Everlight Electronics Co  vs.  Winbond Electronics Corp

Everlight Electronics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Everlight Electronics Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Everlight Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Winbond Electronics Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Winbond Electronics Corp are ranked lower than 9 (%) 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.

Pair Trading with Everlight Electronics and Winbond Electronics

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

The idea behind Everlight Electronics Co and Winbond Electronics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.