Correlation Between LandMark Optoelectronics and WiseChip Semiconductor

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

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

Diversification Opportunities for LandMark Optoelectronics and WiseChip Semiconductor

-0.42

Correlation Coefficient

LandMark Optoelectronics  WiseChip Semiconductor

Very good diversification

The 3 months correlation between LandMark and WiseChip is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding LandMark Optoelectronics and WiseChip Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WiseChip Semiconductor and LandMark Optoelectronics 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 LandMark Optoelectronics are associated (or correlated) with WiseChip Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WiseChip Semiconductor has no effect on the direction of LandMark Optoelectronics i.e., LandMark Optoelectronics and WiseChip Semiconductor go up and down completely randomly.

Pair Corralation between LandMark Optoelectronics and WiseChip Semiconductor

Assuming the 90 days trading horizon LandMark Optoelectronics is expected to generate 1.8 times more return on investment than WiseChip Semiconductor. However, LandMark Optoelectronics is 1.8 times more volatile than WiseChip Semiconductor. It trades about 0.22 of its potential returns per unit of risk. WiseChip Semiconductor is currently generating about -0.05 per unit of risk. If you would invest  32,400  in LandMark Optoelectronics on October 26, 2024 and sell it today you would earn a total of  20,500  from holding LandMark Optoelectronics or generate 63.27% return on investment over 90 days.

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

LandMark Optoelectronics  vs.  WiseChip Semiconductor

LandMark Optoelectronics

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LandMark Optoelectronics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LandMark Optoelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

WiseChip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WiseChip Semiconductor 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.

Pair Trading with LandMark Optoelectronics and WiseChip Semiconductor

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

The idea behind LandMark Optoelectronics and WiseChip Semiconductor 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.