Correlation Between Walsin Technology and Realtek Semiconductor

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

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

Diversification Opportunities for Walsin Technology and Realtek Semiconductor

-0.68

Correlation Coefficient

Walsin Technology  Realtek Semiconductor

Excellent diversification

The 3 months correlation between Walsin and Realtek is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Technology Corp and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and Walsin Technology 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 Walsin Technology Corp are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of Walsin Technology i.e., Walsin Technology and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between Walsin Technology and Realtek Semiconductor

Assuming the 90 days trading horizon Walsin Technology Corp is expected to under-perform the Realtek Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Walsin Technology Corp is 1.31 times less risky than Realtek Semiconductor. The stock trades about -0.11 of its potential returns per unit of risk. The Realtek Semiconductor Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  51,900  in Realtek Semiconductor Corp on October 9, 2024 and sell it today you would earn a total of  2,100  from holding Realtek Semiconductor Corp or generate 4.05% return on investment over 90 days.

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

Walsin Technology Corp  vs.  Realtek Semiconductor Corp

Walsin Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walsin Technology Corp 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.

Realtek Semiconductor

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walsin Technology and Realtek Semiconductor

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

The idea behind Walsin Technology Corp and Realtek Semiconductor 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.