Correlation Between Wistron Information and Yuan High

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

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

Diversification Opportunities for Wistron Information and Yuan High

-0.07

Correlation Coefficient

Wistron Information  Yuan High

Good diversification

The 3 months correlation between Wistron and Yuan is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wistron Information Technology and Yuan High Tech Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yuan High Tech and Wistron Information 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 Wistron Information Technology are associated (or correlated) with Yuan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yuan High Tech has no effect on the direction of Wistron Information i.e., Wistron Information and Yuan High go up and down completely randomly.

Pair Corralation between Wistron Information and Yuan High

Assuming the 90 days trading horizon Wistron Information is expected to generate 1.12 times less return on investment than Yuan High. In addition to that, Wistron Information is 1.1 times more volatile than Yuan High Tech Development. It trades about 0.02 of its total potential returns per unit of risk. Yuan High Tech Development is currently generating about 0.03 per unit of volatility. If you would invest  17,050  in Yuan High Tech Development on September 23, 2024 and sell it today you would earn a total of  250.00  from holding Yuan High Tech Development or generate 1.47% return on investment over 90 days.

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

Wistron Information Technology  vs.  Yuan High Tech Development

Wistron Information

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron Information Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wistron Information is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yuan High Tech

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yuan High Tech Development are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yuan High 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 Wistron Information and Yuan High

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

The idea behind Wistron Information Technology and Yuan High Tech Development 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.