Correlation Between Answer Technology and WT Microelectronics

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

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

Diversification Opportunities for Answer Technology and WT Microelectronics

-0.46

Correlation Coefficient

Answer Technology  WT Microelectronics

Very good diversification

The 3 months correlation between Answer and 3036 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Answer Technology Co and WT Microelectronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Microelectronics and Answer 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 Answer Technology Co 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 Answer Technology i.e., Answer Technology and WT Microelectronics go up and down completely randomly.

Pair Corralation between Answer Technology and WT Microelectronics

Assuming the 90 days trading horizon Answer Technology Co is expected to under-perform the WT Microelectronics. But the stock apears to be less risky and, when comparing its historical volatility, Answer Technology Co is 2.06 times less risky than WT Microelectronics. The stock trades about -0.04 of its potential returns per unit of risk. The WT Microelectronics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  10,750  in WT Microelectronics Co on September 16, 2024 and sell it today you would lose (200.00) from holding WT Microelectronics Co or give up 1.86% of portfolio value over 90 days.

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

Answer Technology Co  vs.  WT Microelectronics Co

Answer Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Answer Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Answer Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

WT Microelectronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Microelectronics Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WT Microelectronics 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 Answer Technology and WT Microelectronics

The main advantage of trading using opposite Answer Technology and WT Microelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Answer Technology 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 Answer Technology Co 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.