Correlation Between WiseChip Semiconductor and GeoVision

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

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

Diversification Opportunities for WiseChip Semiconductor and GeoVision

0.69

Correlation Coefficient

WiseChip Semiconductor  GeoVision

Poor diversification

The 3 months correlation between WiseChip and GeoVision is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WiseChip Semiconductor and GeoVision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVision and WiseChip Semiconductor 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 WiseChip Semiconductor are associated (or correlated) with GeoVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVision has no effect on the direction of WiseChip Semiconductor i.e., WiseChip Semiconductor and GeoVision go up and down completely randomly.

Pair Corralation between WiseChip Semiconductor and GeoVision

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to generate 1.31 times more return on investment than GeoVision. However, WiseChip Semiconductor is 1.31 times more volatile than GeoVision. It trades about 0.01 of its potential returns per unit of risk. GeoVision is currently generating about 0.01 per unit of risk. If you would invest  3,310  in WiseChip Semiconductor on December 4, 2024 and sell it today you would earn a total of  5.00  from holding WiseChip Semiconductor or generate 0.15% return on investment over 90 days.

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

WiseChip Semiconductor  vs.  GeoVision

WiseChip Semiconductor

Risk-Adjusted Performance

Weak

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

GeoVision

Risk-Adjusted Performance

Very Weak

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

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

The idea behind WiseChip Semiconductor and GeoVision 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.