Correlation Between GlobalWafers and Realtek Semiconductor

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

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

Diversification Opportunities for GlobalWafers and Realtek Semiconductor

-0.65

Correlation Coefficient

GlobalWafers  Realtek Semiconductor

Excellent diversification

The 3 months correlation between GlobalWafers and Realtek is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Realtek Semiconductor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realtek Semiconductor and GlobalWafers 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 GlobalWafers Co are associated (or correlated) with Realtek Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realtek Semiconductor has no effect on the direction of GlobalWafers i.e., GlobalWafers and Realtek Semiconductor go up and down completely randomly.

Pair Corralation between GlobalWafers and Realtek Semiconductor

Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the Realtek Semiconductor. In addition to that, GlobalWafers is 1.16 times more volatile than Realtek Semiconductor Corp. It trades about -0.07 of its total potential returns per unit of risk. Realtek Semiconductor Corp is currently generating about 0.11 per unit of volatility. If you would invest  49,200  in Realtek Semiconductor Corp on December 1, 2024 and sell it today you would earn a total of  5,800  from holding Realtek Semiconductor Corp or generate 11.79% return on investment over 90 days.

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

GlobalWafers Co  vs.  Realtek Semiconductor Corp

GlobalWafers

Risk-Adjusted Performance

Very Weak

Over the last 90 days GlobalWafers Co 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.

Realtek Semiconductor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Realtek Semiconductor Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Realtek Semiconductor showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GlobalWafers and Realtek Semiconductor

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

The idea behind GlobalWafers Co and Realtek Semiconductor 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.