Correlation Between Wistron NeWeb and Arima Communications

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

Diversification Opportunities for Wistron NeWeb and Arima Communications

-0.03

Correlation Coefficient

Wistron NeWeb  Arima Communications

Good diversification

The 3 months correlation between Wistron and Arima is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Wistron NeWeb Corp and Arima Communications Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arima Communications 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 Arima Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arima Communications Corp has no effect on the direction of Wistron NeWeb i.e., Wistron NeWeb and Arima Communications go up and down completely randomly.

Pair Corralation between Wistron NeWeb and Arima Communications

Assuming the 90 days trading horizon Wistron NeWeb is expected to generate 1.16 times less return on investment than Arima Communications. But when comparing it to its historical volatility, Wistron NeWeb Corp is 2.17 times less risky than Arima Communications. It trades about 0.09 of its potential returns per unit of risk. Arima Communications Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Arima Communications Corp on December 2, 2024 and sell it today you would earn a total of  40.00  from holding Arima Communications Corp or generate 2.18% return on investment over 90 days.

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

Wistron NeWeb Corp  vs.  Arima Communications Corp

Wistron NeWeb Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron NeWeb Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron NeWeb showed solid returns over the last few months and may actually be approaching a breakup point.

Arima Communications Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arima Communications Corp 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.

Pair Trading with Wistron NeWeb and Arima Communications

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

The idea behind Wistron NeWeb Corp and Arima Communications 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.

Check out your portfolio center.

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.