Correlation Between Frequency Electronics and Wialan Technologies

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

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

Diversification Opportunities for Frequency Electronics and Wialan Technologies

0.08

Correlation Coefficient

Frequency Electronics  Wialan Technologies

Significant diversification

The 3 months correlation between Frequency and Wialan is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Frequency Electronics and Wialan Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wialan Technologies and Frequency Electronics 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 Frequency Electronics are associated (or correlated) with Wialan Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wialan Technologies has no effect on the direction of Frequency Electronics i.e., Frequency Electronics and Wialan Technologies go up and down completely randomly.

Pair Corralation between Frequency Electronics and Wialan Technologies

Given the investment horizon of 90 days Frequency Electronics is expected to under-perform the Wialan Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Frequency Electronics is 2.89 times less risky than Wialan Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The Wialan Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.08  in Wialan Technologies on December 29, 2024 and sell it today you would earn a total of  0.02  from holding Wialan Technologies or generate 25.0% return on investment over 90 days.

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

Frequency Electronics  vs.  Wialan Technologies

Frequency Electronics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Frequency Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Wialan Technologies

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wialan Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Wialan Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Frequency Electronics and Wialan Technologies

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

The idea behind Frequency Electronics and Wialan 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 Transaction History module to view history of all your transactions and understand their impact on performance.