Correlation Between GlobalWafers and Interactive Digital

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

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

Diversification Opportunities for GlobalWafers and Interactive Digital

0.48

Correlation Coefficient

GlobalWafers  Interactive Digital

Very weak diversification

The 3 months correlation between GlobalWafers and Interactive is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding GlobalWafers Co and Interactive Digital Technologi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interactive Digital 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 Interactive Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interactive Digital has no effect on the direction of GlobalWafers i.e., GlobalWafers and Interactive Digital go up and down completely randomly.

Pair Corralation between GlobalWafers and Interactive Digital

Assuming the 90 days trading horizon GlobalWafers Co is expected to under-perform the Interactive Digital. In addition to that, GlobalWafers is 3.42 times more volatile than Interactive Digital Technologies. It trades about -0.1 of its total potential returns per unit of risk. Interactive Digital Technologies is currently generating about 0.12 per unit of volatility. If you would invest  8,260  in Interactive Digital Technologies on December 4, 2024 and sell it today you would earn a total of  370.00  from holding Interactive Digital Technologies or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.21%
Values	Daily Returns

GlobalWafers Co  vs.  Interactive Digital Technologi

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 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.

Interactive Digital

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interactive Digital Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Interactive Digital 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 Interactive Digital

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

The idea behind GlobalWafers Co and Interactive Digital Technologies 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.