Correlation Between WiseChip Semiconductor and Edison Opto

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

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

Diversification Opportunities for WiseChip Semiconductor and Edison Opto

-0.12

Correlation Coefficient

WiseChip Semiconductor  Edison Opto

Good diversification

The 3 months correlation between WiseChip and Edison is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding WiseChip Semiconductor and Edison Opto Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison Opto Corp 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 Edison Opto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison Opto Corp has no effect on the direction of WiseChip Semiconductor i.e., WiseChip Semiconductor and Edison Opto go up and down completely randomly.

Pair Corralation between WiseChip Semiconductor and Edison Opto

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to under-perform the Edison Opto. But the stock apears to be less risky and, when comparing its historical volatility, WiseChip Semiconductor is 1.06 times less risky than Edison Opto. The stock trades about -0.12 of its potential returns per unit of risk. The Edison Opto Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Edison Opto Corp on December 31, 2024 and sell it today you would lose (135.00) from holding Edison Opto Corp or give up 5.19% of portfolio value over 90 days.

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

WiseChip Semiconductor  vs.  Edison Opto Corp

WiseChip Semiconductor

Risk-Adjusted Performance

Very 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 latest abnormal 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.

Edison Opto Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with WiseChip Semiconductor and Edison Opto

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

The idea behind WiseChip Semiconductor and Edison Opto 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.