Correlation Between GlobalWafers and LandMark Optoelectronics

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

By analyzing existing cross correlation between GlobalWafers Co and LandMark Optoelectronics, you can compare the effects of market volatilities on GlobalWafers and LandMark Optoelectronics 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 LandMark Optoelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of GlobalWafers and LandMark Optoelectronics.

Diversification Opportunities for GlobalWafers and LandMark Optoelectronics

-0.4

Correlation Coefficient

GlobalWafers  LandMark Optoelectronics

Very good diversification

The 3 months correlation between GlobalWafers and LandMark is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and LandMark Optoelectronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LandMark Optoelectronics 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 LandMark Optoelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LandMark Optoelectronics has no effect on the direction of GlobalWafers i.e., GlobalWafers and LandMark Optoelectronics go up and down completely randomly.

Pair Corralation between GlobalWafers and LandMark Optoelectronics

Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the LandMark Optoelectronics. But the stock apears to be less risky and, when comparing its historical volatility, GlobalWafers Co is 1.83 times less risky than LandMark Optoelectronics. The stock trades about -0.04 of its potential returns per unit of risk. The LandMark Optoelectronics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  36,700  in LandMark Optoelectronics on October 7, 2024 and sell it today you would lose (150.00) from holding LandMark Optoelectronics or give up 0.41% of portfolio value over 90 days.

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

GlobalWafers Co  vs.  LandMark Optoelectronics

GlobalWafers

Risk-Adjusted Performance

0 of 100

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

LandMark Optoelectronics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LandMark Optoelectronics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LandMark Optoelectronics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GlobalWafers and LandMark Optoelectronics

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

The idea behind GlobalWafers Co and LandMark Optoelectronics 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.