Correlation Between Coretronic and Wistron Corp

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

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

Diversification Opportunities for Coretronic and Wistron Corp

-0.43

Correlation Coefficient

Coretronic  Wistron Corp

Very good diversification

The 3 months correlation between Coretronic and Wistron is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Coretronic and Wistron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Corp and Coretronic 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 Coretronic are associated (or correlated) with Wistron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Corp has no effect on the direction of Coretronic i.e., Coretronic and Wistron Corp go up and down completely randomly.

Pair Corralation between Coretronic and Wistron Corp

Assuming the 90 days trading horizon Coretronic is expected to generate 2.28 times less return on investment than Wistron Corp. But when comparing it to its historical volatility, Coretronic is 1.26 times less risky than Wistron Corp. It trades about 0.06 of its potential returns per unit of risk. Wistron Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,950  in Wistron Corp on September 26, 2024 and sell it today you would earn a total of  7,800  from holding Wistron Corp or generate 264.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Coretronic  vs.  Wistron Corp

Coretronic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coretronic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Coretronic showed solid returns over the last few months and may actually be approaching a breakup point.

Wistron Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wistron Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Coretronic and Wistron Corp

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

The idea behind Coretronic and Wistron 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.

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.