Correlation Between Walsin Technology and Darfon Electronics

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

Diversification Opportunities for Walsin Technology and Darfon Electronics

0.41

Correlation Coefficient

Walsin Technology  Darfon Electronics

Very weak diversification

The 3 months correlation between Walsin and Darfon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Walsin Technology Corp and Darfon Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darfon Electronics 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 Darfon Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darfon Electronics Corp has no effect on the direction of Walsin Technology i.e., Walsin Technology and Darfon Electronics go up and down completely randomly.

Pair Corralation between Walsin Technology and Darfon Electronics

Assuming the 90 days trading horizon Walsin Technology Corp is expected to generate 1.13 times more return on investment than Darfon Electronics. However, Walsin Technology is 1.13 times more volatile than Darfon Electronics Corp. It trades about 0.06 of its potential returns per unit of risk. Darfon Electronics Corp is currently generating about -0.05 per unit of risk. If you would invest  9,300  in Walsin Technology Corp on December 23, 2024 and sell it today you would earn a total of  470.00  from holding Walsin Technology Corp or generate 5.05% return on investment over 90 days.

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

Walsin Technology Corp  vs.  Darfon Electronics Corp

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.

Darfon Electronics Corp

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Walsin Technology Corp and Darfon Electronics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.