Correlation Between Powerchip Semiconductor and GlobalWafers

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

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

Diversification Opportunities for Powerchip Semiconductor and GlobalWafers

0.86

Correlation Coefficient

Powerchip Semiconductor  GlobalWafers

Very poor diversification

The 3 months correlation between Powerchip and GlobalWafers is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Powerchip Semiconductor Manufa and GlobalWafers Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GlobalWafers and Powerchip Semiconductor 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 Powerchip Semiconductor Manufacturing are associated (or correlated) with GlobalWafers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GlobalWafers has no effect on the direction of Powerchip Semiconductor i.e., Powerchip Semiconductor and GlobalWafers go up and down completely randomly.

Pair Corralation between Powerchip Semiconductor and GlobalWafers

Assuming the 90 days trading horizon Powerchip Semiconductor Manufacturing is expected to generate 1.73 times more return on investment than GlobalWafers. However, Powerchip Semiconductor is 1.73 times more volatile than GlobalWafers Co. It trades about -0.18 of its potential returns per unit of risk. GlobalWafers Co is currently generating about -0.62 per unit of risk. If you would invest  1,760  in Powerchip Semiconductor Manufacturing on September 25, 2024 and sell it today you would lose (170.00) from holding Powerchip Semiconductor Manufacturing or give up 9.66% of portfolio value over 90 days.

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

Powerchip Semiconductor Manufa  vs.  GlobalWafers Co

Powerchip Semiconductor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerchip Semiconductor Manufacturing 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Powerchip Semiconductor and GlobalWafers

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

The idea behind Powerchip Semiconductor Manufacturing and GlobalWafers Co 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.