Correlation Between Walsin Technology and LARGAN Precision

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

Diversification Opportunities for Walsin Technology and LARGAN Precision

-0.46

Correlation Coefficient

Walsin Technology  LARGAN Precision

Very good diversification

The 3 months correlation between Walsin and LARGAN is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Technology Corp and LARGAN Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LARGAN Precision 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 LARGAN Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LARGAN Precision has no effect on the direction of Walsin Technology i.e., Walsin Technology and LARGAN Precision go up and down completely randomly.

Pair Corralation between Walsin Technology and LARGAN Precision

Assuming the 90 days trading horizon Walsin Technology Corp is expected to under-perform the LARGAN Precision. But the stock apears to be less risky and, when comparing its historical volatility, Walsin Technology Corp is 1.27 times less risky than LARGAN Precision. The stock trades about -0.15 of its potential returns per unit of risk. The LARGAN Precision Co is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  244,000  in LARGAN Precision Co on October 10, 2024 and sell it today you would earn a total of  22,500  from holding LARGAN Precision Co or generate 9.22% return on investment over 90 days.

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

Walsin Technology Corp  vs.  LARGAN Precision Co

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.

LARGAN Precision

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LARGAN Precision Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, LARGAN Precision may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Walsin Technology and LARGAN Precision

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

The idea behind Walsin Technology Corp and LARGAN Precision 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.