Correlation Between Etron Technology and Winbond Electronics

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

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

Diversification Opportunities for Etron Technology and Winbond Electronics

0.86

Correlation Coefficient

Etron Technology  Winbond Electronics

Very poor diversification

The 3 months correlation between Etron and Winbond is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Etron Technology and Winbond Electronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winbond Electronics Corp and Etron 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 Etron Technology are associated (or correlated) with Winbond Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winbond Electronics Corp has no effect on the direction of Etron Technology i.e., Etron Technology and Winbond Electronics go up and down completely randomly.

Pair Corralation between Etron Technology and Winbond Electronics

Assuming the 90 days trading horizon Etron Technology is expected to generate 1.17 times more return on investment than Winbond Electronics. However, Etron Technology is 1.17 times more volatile than Winbond Electronics Corp. It trades about 0.21 of its potential returns per unit of risk. Winbond Electronics Corp is currently generating about -0.1 per unit of risk. If you would invest  3,290  in Etron Technology on September 30, 2024 and sell it today you would earn a total of  385.00  from holding Etron Technology or generate 11.7% return on investment over 90 days.

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

Etron Technology  vs.  Winbond Electronics Corp

Etron Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Winbond Electronics Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winbond Electronics Corp 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Etron Technology and Winbond Electronics

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

The idea behind Etron Technology and Winbond Electronics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.