Correlation Between Ardentec and Wistron Corp

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

By analyzing existing cross correlation between Ardentec and Wistron Corp, you can compare the effects of market volatilities on Ardentec and Wistron Corp 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 Wistron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ardentec and Wistron Corp.

Diversification Opportunities for Ardentec and Wistron Corp

0.31

Correlation Coefficient

Ardentec  Wistron Corp

Weak diversification

The 3 months correlation between Ardentec and Wistron is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ardentec and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp 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 Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Ardentec i.e., Ardentec and Wistron Corp go up and down completely randomly.

Pair Corralation between Ardentec and Wistron Corp

Assuming the 90 days trading horizon Ardentec is expected to generate 1.28 times more return on investment than Wistron Corp. However, Ardentec is 1.28 times more volatile than Wistron Corp. It trades about 0.19 of its potential returns per unit of risk. Wistron Corp is currently generating about -0.01 per unit of risk. If you would invest  5,520  in Ardentec on December 23, 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 Weak
Accuracy	100.0%
Values	Daily Returns

Ardentec  vs.  Wistron Corp

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.

Wistron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wistron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wistron Corp 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 Ardentec and Wistron Corp

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

The idea behind Ardentec and Wistron Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.