Correlation Between Advanced Wireless and Chief Telecom

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

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

Diversification Opportunities for Advanced Wireless and Chief Telecom

0.72

Correlation Coefficient

Advanced Wireless  Chief Telecom

Poor diversification

The 3 months correlation between Advanced and Chief is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Wireless Semiconducto and Chief Telecom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chief Telecom and Advanced Wireless 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 Advanced Wireless Semiconductor are associated (or correlated) with Chief Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chief Telecom has no effect on the direction of Advanced Wireless i.e., Advanced Wireless and Chief Telecom go up and down completely randomly.

Pair Corralation between Advanced Wireless and Chief Telecom

Assuming the 90 days trading horizon Advanced Wireless Semiconductor is expected to under-perform the Chief Telecom. In addition to that, Advanced Wireless is 1.41 times more volatile than Chief Telecom. It trades about -0.13 of its total potential returns per unit of risk. Chief Telecom is currently generating about -0.07 per unit of volatility. If you would invest  47,350  in Chief Telecom on December 30, 2024 and sell it today you would lose (3,600) from holding Chief Telecom or give up 7.6% of portfolio value over 90 days.

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

Advanced Wireless Semiconducto  vs.  Chief Telecom

Advanced Wireless

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advanced Wireless Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Chief Telecom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chief Telecom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Pair Trading with Advanced Wireless and Chief Telecom

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

The idea behind Advanced Wireless Semiconductor and Chief Telecom 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.