Correlation Between Weltrend Semiconductor and Sunplus Technology

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

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

Diversification Opportunities for Weltrend Semiconductor and Sunplus Technology

0.74

Correlation Coefficient

Weltrend Semiconductor  Sunplus Technology

Poor diversification

The 3 months correlation between Weltrend and Sunplus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Weltrend Semiconductor and Sunplus Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunplus Technology and Weltrend 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 Weltrend Semiconductor are associated (or correlated) with Sunplus Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunplus Technology has no effect on the direction of Weltrend Semiconductor i.e., Weltrend Semiconductor and Sunplus Technology go up and down completely randomly.

Pair Corralation between Weltrend Semiconductor and Sunplus Technology

Assuming the 90 days trading horizon Weltrend Semiconductor is expected to under-perform the Sunplus Technology. But the stock apears to be less risky and, when comparing its historical volatility, Weltrend Semiconductor is 1.0 times less risky than Sunplus Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Sunplus Technology Co is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,015  in Sunplus Technology Co on October 10, 2024 and sell it today you would lose (185.00) from holding Sunplus Technology Co or give up 6.14% of portfolio value over 90 days.

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

Weltrend Semiconductor  vs.  Sunplus Technology Co

Weltrend Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weltrend Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sunplus Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunplus Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sunplus Technology 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 Weltrend Semiconductor and Sunplus Technology

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

The idea behind Weltrend Semiconductor and Sunplus Technology 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.