Correlation Between Asmedia Technology and Wistron NeWeb

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

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

Diversification Opportunities for Asmedia Technology and Wistron NeWeb

0.76

Correlation Coefficient

Asmedia Technology  Wistron NeWeb

Poor diversification

The 3 months correlation between Asmedia and Wistron is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Asmedia Technology and Wistron NeWeb Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron NeWeb Corp and Asmedia Technology 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 Asmedia Technology are associated (or correlated) with Wistron NeWeb. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron NeWeb Corp has no effect on the direction of Asmedia Technology i.e., Asmedia Technology and Wistron NeWeb go up and down completely randomly.

Pair Corralation between Asmedia Technology and Wistron NeWeb

Assuming the 90 days trading horizon Asmedia Technology is expected to generate 1.58 times less return on investment than Wistron NeWeb. But when comparing it to its historical volatility, Asmedia Technology is 1.27 times less risky than Wistron NeWeb. It trades about 0.08 of its potential returns per unit of risk. Wistron NeWeb Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  13,450  in Wistron NeWeb Corp on October 25, 2024 and sell it today you would earn a total of  750.00  from holding Wistron NeWeb Corp or generate 5.58% return on investment over 90 days.

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

Asmedia Technology  vs.  Wistron NeWeb Corp

Asmedia Technology

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asmedia Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Asmedia Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Wistron NeWeb Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron NeWeb Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron NeWeb showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Asmedia Technology and Wistron NeWeb

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

The idea behind Asmedia Technology and Wistron NeWeb 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.