Correlation Between Wistron NeWeb and Arcadyan Technology

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

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

Diversification Opportunities for Wistron NeWeb and Arcadyan Technology

0.5

Correlation Coefficient

Wistron NeWeb  Arcadyan Technology

Very weak diversification

The 3 months correlation between Wistron and Arcadyan is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Wistron NeWeb Corp and Arcadyan Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadyan Technology Corp and Wistron NeWeb 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 Wistron NeWeb Corp are associated (or correlated) with Arcadyan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadyan Technology Corp has no effect on the direction of Wistron NeWeb i.e., Wistron NeWeb and Arcadyan Technology go up and down completely randomly.

Pair Corralation between Wistron NeWeb and Arcadyan Technology

Assuming the 90 days trading horizon Wistron NeWeb is expected to generate 5.89 times less return on investment than Arcadyan Technology. But when comparing it to its historical volatility, Wistron NeWeb Corp is 1.02 times less risky than Arcadyan Technology. It trades about 0.02 of its potential returns per unit of risk. Arcadyan Technology Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  14,200  in Arcadyan Technology Corp on September 15, 2024 and sell it today you would earn a total of  2,600  from holding Arcadyan Technology Corp or generate 18.31% return on investment over 90 days.

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

Wistron NeWeb Corp  vs.  Arcadyan Technology Corp

Wistron NeWeb Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron NeWeb Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wistron NeWeb is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Arcadyan Technology Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arcadyan Technology Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arcadyan Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wistron NeWeb and Arcadyan Technology

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

The idea behind Wistron NeWeb Corp and Arcadyan Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.