Correlation Between Derkwoo Electronics and Wave Electronics

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

By analyzing existing cross correlation between Derkwoo Electronics Co and Wave Electronics Co, you can compare the effects of market volatilities on Derkwoo Electronics and Wave 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 Derkwoo Electronics with a short position of Wave Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Derkwoo Electronics and Wave Electronics.

Diversification Opportunities for Derkwoo Electronics and Wave Electronics

0.41

Correlation Coefficient

Derkwoo Electronics  Wave Electronics

Very weak diversification

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

Pair Corralation between Derkwoo Electronics and Wave Electronics

Assuming the 90 days trading horizon Derkwoo Electronics is expected to generate 2.46 times less return on investment than Wave Electronics. In addition to that, Derkwoo Electronics is 1.15 times more volatile than Wave Electronics Co. It trades about 0.01 of its total potential returns per unit of risk. Wave Electronics Co is currently generating about 0.04 per unit of volatility. If you would invest  375,000  in Wave Electronics Co on December 4, 2024 and sell it today you would earn a total of  13,000  from holding Wave Electronics Co or generate 3.47% return on investment over 90 days.

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

Derkwoo Electronics Co  vs.  Wave Electronics Co

Derkwoo Electronics

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Derkwoo Electronics Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Derkwoo Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wave Electronics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Electronics Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Wave Electronics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Derkwoo Electronics and Wave Electronics

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

The idea behind Derkwoo Electronics Co and Wave Electronics 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.