Correlation Between Adata Technology and Wei Chuan

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

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

Diversification Opportunities for Adata Technology and Wei Chuan

0.51

Correlation Coefficient

Adata Technology  Wei Chuan

Very weak diversification

The 3 months correlation between Adata and Wei is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Adata Technology Co and Wei Chuan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wei Chuan Foods and Adata 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 Adata Technology Co are associated (or correlated) with Wei Chuan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wei Chuan Foods has no effect on the direction of Adata Technology i.e., Adata Technology and Wei Chuan go up and down completely randomly.

Pair Corralation between Adata Technology and Wei Chuan

Assuming the 90 days trading horizon Adata Technology Co is expected to generate 4.9 times more return on investment than Wei Chuan. However, Adata Technology is 4.9 times more volatile than Wei Chuan Foods. It trades about 0.09 of its potential returns per unit of risk. Wei Chuan Foods is currently generating about -0.01 per unit of risk. If you would invest  7,900  in Adata Technology Co on December 28, 2024 and sell it today you would earn a total of  890.00  from holding Adata Technology Co or generate 11.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

Adata Technology Co  vs.  Wei Chuan Foods

Adata Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adata Technology Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Adata Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Wei Chuan Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wei Chuan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wei Chuan 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 Adata Technology and Wei Chuan

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

The idea behind Adata Technology Co and Wei Chuan Foods 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.