Correlation Between WIN Semiconductors and CoAsia Microelectronics

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

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

Diversification Opportunities for WIN Semiconductors and CoAsia Microelectronics

0.25

Correlation Coefficient

WIN Semiconductors  CoAsia Microelectronics

Modest diversification

The 3 months correlation between WIN and CoAsia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding WIN Semiconductors and CoAsia Microelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoAsia Microelectronics and WIN Semiconductors 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 WIN Semiconductors are associated (or correlated) with CoAsia Microelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoAsia Microelectronics has no effect on the direction of WIN Semiconductors i.e., WIN Semiconductors and CoAsia Microelectronics go up and down completely randomly.

Pair Corralation between WIN Semiconductors and CoAsia Microelectronics

Assuming the 90 days trading horizon WIN Semiconductors is expected to generate 8.28 times less return on investment than CoAsia Microelectronics. But when comparing it to its historical volatility, WIN Semiconductors is 1.81 times less risky than CoAsia Microelectronics. It trades about 0.05 of its potential returns per unit of risk. CoAsia Microelectronics is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,840  in CoAsia Microelectronics on December 24, 2024 and sell it today you would earn a total of  3,100  from holding CoAsia Microelectronics or generate 80.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

WIN Semiconductors  vs.  CoAsia Microelectronics

WIN Semiconductors

Risk-Adjusted Performance

Modest

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

CoAsia Microelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CoAsia Microelectronics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CoAsia Microelectronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WIN Semiconductors and CoAsia Microelectronics

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

The idea behind WIN Semiconductors and CoAsia Microelectronics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.