Correlation Between Roo Hsing and Wistron Information

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

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

Diversification Opportunities for Roo Hsing and Wistron Information

0.16

Correlation Coefficient

Roo Hsing  Wistron Information

Average diversification

The 3 months correlation between Roo and Wistron is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Roo Hsing Co and Wistron Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Information and Roo Hsing 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 Roo Hsing Co are associated (or correlated) with Wistron Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Information has no effect on the direction of Roo Hsing i.e., Roo Hsing and Wistron Information go up and down completely randomly.

Pair Corralation between Roo Hsing and Wistron Information

Assuming the 90 days trading horizon Roo Hsing is expected to generate 1.84 times less return on investment than Wistron Information. But when comparing it to its historical volatility, Roo Hsing Co is 1.1 times less risky than Wistron Information. It trades about 0.02 of its potential returns per unit of risk. Wistron Information Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  8,248  in Wistron Information Technology on October 23, 2024 and sell it today you would earn a total of  2,002  from holding Wistron Information Technology or generate 24.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Roo Hsing Co  vs.  Wistron Information Technology

Roo Hsing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Roo Hsing Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Roo Hsing is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wistron Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wistron Information Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Roo Hsing and Wistron Information

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

The idea behind Roo Hsing Co and Wistron Information Technology 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.