Correlation Between Wafer Works and Holtek Semiconductor

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

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

Diversification Opportunities for Wafer Works and Holtek Semiconductor

0.69

Correlation Coefficient

Wafer Works  Holtek Semiconductor

Poor diversification

The 3 months correlation between Wafer and Holtek is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Wafer Works and Holtek Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Holtek Semiconductor 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 Holtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Holtek Semiconductor has no effect on the direction of Wafer Works i.e., Wafer Works and Holtek Semiconductor go up and down completely randomly.

Pair Corralation between Wafer Works and Holtek Semiconductor

Assuming the 90 days trading horizon Wafer Works is expected to generate 1.42 times more return on investment than Holtek Semiconductor. However, Wafer Works is 1.42 times more volatile than Holtek Semiconductor. It trades about -0.03 of its potential returns per unit of risk. Holtek Semiconductor is currently generating about -0.09 per unit of risk. If you would invest  2,925  in Wafer Works on September 30, 2024 and sell it today you would lose (85.00) from holding Wafer Works or give up 2.91% 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.  Holtek Semiconductor

Wafer Works

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Holtek Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holtek Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Wafer Works and Holtek Semiconductor

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

The idea behind Wafer Works and Holtek Semiconductor 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.