Correlation Between Ardentec and WT Microelectronics

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

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

Diversification Opportunities for Ardentec and WT Microelectronics

0.94

Correlation Coefficient

Ardentec  WT Microelectronics

Almost no diversification

The 3 months correlation between Ardentec and 3036A is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Ardentec and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics and Ardentec 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 Ardentec 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 Ardentec i.e., Ardentec and WT Microelectronics go up and down completely randomly.

Pair Corralation between Ardentec and WT Microelectronics

Assuming the 90 days trading horizon Ardentec is expected to generate 23.2 times more return on investment than WT Microelectronics. However, Ardentec is 23.2 times more volatile than WT Microelectronics Co. It trades about 0.19 of its potential returns per unit of risk. WT Microelectronics Co is currently generating about 0.2 per unit of risk. If you would invest  5,520  in Ardentec on December 24, 2024 and sell it today you would earn a total of  1,930  from holding Ardentec or generate 34.96% return on investment over 90 days.

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

Ardentec  vs.  WT Microelectronics Co

Ardentec

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ardentec are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ardentec showed solid returns over the last few months and may actually be approaching a breakup point.

WT Microelectronics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WT Microelectronics Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, WT Microelectronics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ardentec and WT Microelectronics

The main advantage of trading using opposite Ardentec and WT Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ardentec 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 Ardentec 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.