Correlation Between Everlight Electronics and WT Microelectronics

Can any of the company-specific risk be diversified away by investing in both Everlight Electronics and WT Microelectronics 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 WT Microelectronics 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 WT Microelectronics Co, you can compare the effects of market volatilities on Everlight Electronics and WT Microelectronics 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 WT Microelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Everlight Electronics and WT Microelectronics.

Diversification Opportunities for Everlight Electronics and WT Microelectronics

-0.08

Correlation Coefficient

Everlight Electronics  WT Microelectronics

Good diversification

The 3 months correlation between Everlight and 3036A is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Everlight Electronics Co and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics 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 WT Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Microelectronics has no effect on the direction of Everlight Electronics i.e., Everlight Electronics and WT Microelectronics go up and down completely randomly.

Pair Corralation between Everlight Electronics and WT Microelectronics

Assuming the 90 days trading horizon Everlight Electronics Co is expected to under-perform the WT Microelectronics. In addition to that, Everlight Electronics is 14.64 times more volatile than WT Microelectronics Co. It trades about -0.01 of its total potential returns per unit of risk. WT Microelectronics Co is currently generating about 0.13 per unit of volatility. If you would invest  4,980  in WT Microelectronics Co on December 31, 2024 and sell it today you would earn a total of  50.00  from holding WT Microelectronics Co or generate 1.0% return on investment over 90 days.

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

Everlight Electronics Co  vs.  WT Microelectronics Co

Everlight Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everlight Electronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Everlight Electronics is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WT Microelectronics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WT Microelectronics Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WT Microelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Everlight Electronics and WT Microelectronics

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

The idea behind Everlight Electronics Co and WT Microelectronics Co 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.