Correlation Between Weikeng Industrial and WT Microelectronics

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

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

Diversification Opportunities for Weikeng Industrial and WT Microelectronics

0.44

Correlation Coefficient

Weikeng Industrial  WT Microelectronics

Very weak diversification

The 3 months correlation between Weikeng and 3036 is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Weikeng Industrial Co and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics and Weikeng Industrial 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 Weikeng Industrial Co are associated (or correlated) with WT Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Microelectronics has no effect on the direction of Weikeng Industrial i.e., Weikeng Industrial and WT Microelectronics go up and down completely randomly.

Pair Corralation between Weikeng Industrial and WT Microelectronics

Assuming the 90 days trading horizon Weikeng Industrial Co is expected to under-perform the WT Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Weikeng Industrial Co is 2.28 times less risky than WT Microelectronics. The stock trades about -0.17 of its potential returns per unit of risk. The WT Microelectronics Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,100  in WT Microelectronics Co on October 9, 2024 and sell it today you would earn a total of  200.00  from holding WT Microelectronics Co or generate 1.8% return on investment over 90 days.

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

Weikeng Industrial Co  vs.  WT Microelectronics Co

Weikeng Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weikeng Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Weikeng Industrial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WT Microelectronics

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Weikeng Industrial and WT Microelectronics

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

The idea behind Weikeng Industrial Co and WT Microelectronics 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.