Correlation Between Para Light and Winstek Semiconductor

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

By analyzing existing cross correlation between Para Light Electronics and Winstek Semiconductor Co, you can compare the effects of market volatilities on Para Light and Winstek 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 Para Light with a short position of Winstek Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Para Light and Winstek Semiconductor.

Diversification Opportunities for Para Light and Winstek Semiconductor

0.75

Correlation Coefficient

Para Light  Winstek Semiconductor

Poor diversification

The 3 months correlation between Para and Winstek is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Para Light Electronics and Winstek Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winstek Semiconductor and Para Light 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 Para Light Electronics are associated (or correlated) with Winstek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winstek Semiconductor has no effect on the direction of Para Light i.e., Para Light and Winstek Semiconductor go up and down completely randomly.

Pair Corralation between Para Light and Winstek Semiconductor

Assuming the 90 days trading horizon Para Light Electronics is expected to generate 0.43 times more return on investment than Winstek Semiconductor. However, Para Light Electronics is 2.34 times less risky than Winstek Semiconductor. It trades about -0.14 of its potential returns per unit of risk. Winstek Semiconductor Co is currently generating about -0.06 per unit of risk. If you would invest  900.00  in Para Light Electronics on December 22, 2024 and sell it today you would lose (66.00) from holding Para Light Electronics or give up 7.33% of portfolio value over 90 days.

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

Para Light Electronics  vs.  Winstek Semiconductor Co

Para Light Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Para Light Electronics 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.

Winstek Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Winstek Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Para Light and Winstek Semiconductor

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

The idea behind Para Light Electronics and Winstek Semiconductor Co 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.