Correlation Between Walsin Technology and Nuvoton Technology

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

Diversification Opportunities for Walsin Technology and Nuvoton Technology

0.26

Correlation Coefficient

Walsin Technology  Nuvoton Technology

Modest diversification

The 3 months correlation between Walsin and Nuvoton is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Technology Corp and Nuvoton Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvoton Technology Corp 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 Nuvoton Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvoton Technology Corp has no effect on the direction of Walsin Technology i.e., Walsin Technology and Nuvoton Technology go up and down completely randomly.

Pair Corralation between Walsin Technology and Nuvoton Technology

Assuming the 90 days trading horizon Walsin Technology Corp is expected to generate 0.93 times more return on investment than Nuvoton Technology. However, Walsin Technology Corp is 1.07 times less risky than Nuvoton Technology. It trades about 0.01 of its potential returns per unit of risk. Nuvoton Technology Corp is currently generating about -0.02 per unit of risk. If you would invest  9,408  in Walsin Technology Corp on October 24, 2024 and sell it today you would lose (98.00) from holding Walsin Technology Corp or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.74%
Values	Daily Returns

Walsin Technology Corp  vs.  Nuvoton Technology 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.

Nuvoton Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Walsin Technology Corp and Nuvoton Technology 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.