Correlation Between WiseChip Semiconductor and Global PMX

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

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

Diversification Opportunities for WiseChip Semiconductor and Global PMX

0.72

Correlation Coefficient

WiseChip Semiconductor  Global PMX

Poor diversification

The 3 months correlation between WiseChip and Global is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding WiseChip Semiconductor and Global PMX Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global PMX 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 Global PMX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global PMX has no effect on the direction of WiseChip Semiconductor i.e., WiseChip Semiconductor and Global PMX go up and down completely randomly.

Pair Corralation between WiseChip Semiconductor and Global PMX

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to under-perform the Global PMX. But the stock apears to be less risky and, when comparing its historical volatility, WiseChip Semiconductor is 1.44 times less risky than Global PMX. The stock trades about -0.12 of its potential returns per unit of risk. The Global PMX Co is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  12,200  in Global PMX Co on October 6, 2024 and sell it today you would lose (1,450) from holding Global PMX Co or give up 11.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

WiseChip Semiconductor  vs.  Global PMX Co

WiseChip Semiconductor

Risk-Adjusted Performance

0 of 100

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Global PMX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global PMX Co 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.

Pair Trading with WiseChip Semiconductor and Global PMX

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

The idea behind WiseChip Semiconductor and Global PMX 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.