Correlation Between GlobalWafers and Microtips Technology

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

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

Diversification Opportunities for GlobalWafers and Microtips Technology

0.43

Correlation Coefficient

GlobalWafers  Microtips Technology

Very weak diversification

The 3 months correlation between GlobalWafers and Microtips is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Microtips Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microtips Technology 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 Microtips Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microtips Technology has no effect on the direction of GlobalWafers i.e., GlobalWafers and Microtips Technology go up and down completely randomly.

Pair Corralation between GlobalWafers and Microtips Technology

Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the Microtips Technology. In addition to that, GlobalWafers is 1.97 times more volatile than Microtips Technology. It trades about -0.09 of its total potential returns per unit of risk. Microtips Technology is currently generating about -0.07 per unit of volatility. If you would invest  2,755  in Microtips Technology on December 3, 2024 and sell it today you would lose (135.00) from holding Microtips Technology or give up 4.9% of portfolio value over 90 days.

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

GlobalWafers Co  vs.  Microtips Technology

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.

Microtips Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microtips Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Microtips Technology 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 GlobalWafers and Microtips Technology

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

The idea behind GlobalWafers Co and Microtips Technology 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.