Correlation Between GlobalWafers and Episil Holding

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

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

Diversification Opportunities for GlobalWafers and Episil Holding

0.75

Correlation Coefficient

GlobalWafers  Episil Holding

Poor diversification

The 3 months correlation between GlobalWafers and Episil is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Episil Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episil Holding 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 Episil Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episil Holding has no effect on the direction of GlobalWafers i.e., GlobalWafers and Episil Holding go up and down completely randomly.

Pair Corralation between GlobalWafers and Episil Holding

Assuming the 90 days trading horizon GlobalWafers Co is expected to generate 0.63 times more return on investment than Episil Holding. However, GlobalWafers Co is 1.58 times less risky than Episil Holding. It trades about -0.18 of its potential returns per unit of risk. Episil Holding is currently generating about -0.12 per unit of risk. If you would invest  42,000  in GlobalWafers Co on October 9, 2024 and sell it today you would lose (3,500) from holding GlobalWafers Co or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

GlobalWafers Co  vs.  Episil Holding

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 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.

Episil Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Episil Holding 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.

Pair Trading with GlobalWafers and Episil Holding

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

The idea behind GlobalWafers Co and Episil Holding 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.