Correlation Between WiseChip Semiconductor and Primax Electronics

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

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

Diversification Opportunities for WiseChip Semiconductor and Primax Electronics

0.12

Correlation Coefficient

WiseChip Semiconductor  Primax Electronics

Average diversification

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

Pair Corralation between WiseChip Semiconductor and Primax Electronics

Assuming the 90 days trading horizon WiseChip Semiconductor is expected to generate 1.98 times less return on investment than Primax Electronics. But when comparing it to its historical volatility, WiseChip Semiconductor is 1.88 times less risky than Primax Electronics. It trades about 0.16 of its potential returns per unit of risk. Primax Electronics is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  8,130  in Primax Electronics on December 4, 2024 and sell it today you would earn a total of  520.00  from holding Primax Electronics or generate 6.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

WiseChip Semiconductor  vs.  Primax Electronics

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 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.

Primax Electronics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Primax Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Primax Electronics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WiseChip Semiconductor and Primax Electronics

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

The idea behind WiseChip Semiconductor and Primax Electronics 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.