Correlation Between Wafer Works and United Renewable

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

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

Diversification Opportunities for Wafer Works and United Renewable

0.65

Correlation Coefficient

Wafer Works  United Renewable

Poor diversification

The 3 months correlation between Wafer and United is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and United Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Renewable Energy and Wafer Works 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 Wafer Works are associated (or correlated) with United Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Renewable Energy has no effect on the direction of Wafer Works i.e., Wafer Works and United Renewable go up and down completely randomly.

Pair Corralation between Wafer Works and United Renewable

Assuming the 90 days trading horizon Wafer Works is expected to under-perform the United Renewable. But the stock apears to be less risky and, when comparing its historical volatility, Wafer Works is 1.03 times less risky than United Renewable. The stock trades about -0.12 of its potential returns per unit of risk. The United Renewable Energy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,015  in United Renewable Energy on December 30, 2024 and sell it today you would lose (44.00) from holding United Renewable Energy or give up 4.33% of portfolio value over 90 days.

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

Wafer Works  vs.  United Renewable Energy

Wafer Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wafer Works 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 April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

United Renewable Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, United Renewable 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 Wafer Works and United Renewable

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

The idea behind Wafer Works and United Renewable Energy 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.