Correlation Between Acer E and Wistron Information

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

By analyzing existing cross correlation between Acer E Enabling Service and Wistron Information Technology, you can compare the effects of market volatilities on Acer E and Wistron Information 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 Acer E with a short position of Wistron Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Acer E and Wistron Information.

Diversification Opportunities for Acer E and Wistron Information

0.93

Correlation Coefficient

Acer E  Wistron Information

Almost no diversification

The 3 months correlation between Acer and Wistron is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Acer E Enabling Service and Wistron Information Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wistron Information and Acer E 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 Acer E Enabling Service are associated (or correlated) with Wistron Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wistron Information has no effect on the direction of Acer E i.e., Acer E and Wistron Information go up and down completely randomly.

Pair Corralation between Acer E and Wistron Information

Assuming the 90 days trading horizon Acer E Enabling Service is expected to generate 0.93 times more return on investment than Wistron Information. However, Acer E Enabling Service is 1.07 times less risky than Wistron Information. It trades about 0.2 of its potential returns per unit of risk. Wistron Information Technology is currently generating about 0.16 per unit of risk. If you would invest  24,050  in Acer E Enabling Service on September 12, 2024 and sell it today you would earn a total of  6,550  from holding Acer E Enabling Service or generate 27.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Acer E Enabling Service  vs.  Wistron Information Technology

Acer E Enabling

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Acer E Enabling Service are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Acer E showed solid returns over the last few months and may actually be approaching a breakup point.

Wistron Information

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wistron Information Technology are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wistron Information showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acer E and Wistron Information

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

The idea behind Acer E Enabling Service and Wistron Information 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.