Correlation Between Walsin Technology and Elite Semiconductor

Can any of the company-specific risk be diversified away by investing in both Walsin Technology and Elite 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 Elite 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 Elite Semiconductor Memory, you can compare the effects of market volatilities on Walsin Technology and Elite 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 Elite Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walsin Technology and Elite Semiconductor.

Diversification Opportunities for Walsin Technology and Elite Semiconductor

0.64

Correlation Coefficient

Walsin Technology  Elite Semiconductor

Poor diversification

The 3 months correlation between Walsin and Elite is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Technology Corp and Elite Semiconductor Memory in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elite 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 Elite Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elite Semiconductor has no effect on the direction of Walsin Technology i.e., Walsin Technology and Elite Semiconductor go up and down completely randomly.

Pair Corralation between Walsin Technology and Elite Semiconductor

Assuming the 90 days trading horizon Walsin Technology is expected to generate 1.14 times less return on investment than Elite Semiconductor. But when comparing it to its historical volatility, Walsin Technology Corp is 1.46 times less risky than Elite Semiconductor. It trades about 0.07 of its potential returns per unit of risk. Elite Semiconductor Memory is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,330  in Elite Semiconductor Memory on December 22, 2024 and sell it today you would earn a total of  330.00  from holding Elite Semiconductor Memory or generate 5.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.25%
Values	Daily Returns

Walsin Technology Corp  vs.  Elite Semiconductor Memory

Walsin Technology Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Walsin Technology Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Walsin Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Elite Semiconductor

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Walsin Technology and Elite Semiconductor

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

The idea behind Walsin Technology Corp and Elite Semiconductor Memory 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.