Correlation Between Cleanaway and Weltrend Semiconductor

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

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

Diversification Opportunities for Cleanaway and Weltrend Semiconductor

0.47

Correlation Coefficient

Cleanaway  Weltrend Semiconductor

Very weak diversification

The 3 months correlation between Cleanaway and Weltrend is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Cleanaway Co and Weltrend Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weltrend Semiconductor and Cleanaway 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 Cleanaway Co are associated (or correlated) with Weltrend Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weltrend Semiconductor has no effect on the direction of Cleanaway i.e., Cleanaway and Weltrend Semiconductor go up and down completely randomly.

Pair Corralation between Cleanaway and Weltrend Semiconductor

Assuming the 90 days trading horizon Cleanaway Co is expected to generate 0.29 times more return on investment than Weltrend Semiconductor. However, Cleanaway Co is 3.5 times less risky than Weltrend Semiconductor. It trades about 0.27 of its potential returns per unit of risk. Weltrend Semiconductor is currently generating about -0.02 per unit of risk. If you would invest  17,950  in Cleanaway Co on December 30, 2024 and sell it today you would earn a total of  1,450  from holding Cleanaway Co or generate 8.08% return on investment over 90 days.

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

Cleanaway Co  vs.  Weltrend Semiconductor

Cleanaway

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cleanaway Co are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cleanaway may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Weltrend Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Weltrend Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Weltrend Semiconductor 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 Cleanaway and Weltrend Semiconductor

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

The idea behind Cleanaway Co and Weltrend Semiconductor 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.