Correlation Between Wistron NeWeb and U Media

Can any of the company-specific risk be diversified away by investing in both Wistron NeWeb and U Media 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 U Media 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 U Media Communications, you can compare the effects of market volatilities on Wistron NeWeb and U Media 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 U Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wistron NeWeb and U Media.

Diversification Opportunities for Wistron NeWeb and U Media

0.52

Correlation Coefficient

Wistron NeWeb  U Media

Very weak diversification

The 3 months correlation between Wistron and 6470 is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wistron NeWeb Corp and U Media Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Media Communications 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 U Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Media Communications has no effect on the direction of Wistron NeWeb i.e., Wistron NeWeb and U Media go up and down completely randomly.

Pair Corralation between Wistron NeWeb and U Media

Assuming the 90 days trading horizon Wistron NeWeb Corp is expected to generate 1.55 times more return on investment than U Media. However, Wistron NeWeb is 1.55 times more volatile than U Media Communications. It trades about 0.07 of its potential returns per unit of risk. U Media Communications is currently generating about 0.01 per unit of risk. If you would invest  13,500  in Wistron NeWeb Corp on December 30, 2024 and sell it today you would earn a total of  1,150  from holding Wistron NeWeb Corp or generate 8.52% 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.  U Media Communications

Wistron NeWeb Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron NeWeb Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron NeWeb may actually be approaching a critical reversion point that can send shares even higher in April 2025.

U Media Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days U Media Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, U Media 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 Wistron NeWeb and U Media

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

The idea behind Wistron NeWeb Corp and U Media Communications 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.