Correlation Between World Technology and Ensurge Micropower

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

By analyzing existing cross correlation between World Technology Corp and Ensurge Micropower ASA, you can compare the effects of market volatilities on World Technology and Ensurge Micropower 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 World Technology with a short position of Ensurge Micropower. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Technology and Ensurge Micropower.

Diversification Opportunities for World Technology and Ensurge Micropower

0.28

Correlation Coefficient

World Technology  Ensurge Micropower

Modest diversification

The 3 months correlation between World and Ensurge is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding World Technology Corp and Ensurge Micropower ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensurge Micropower ASA and World Technology 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 World Technology Corp are associated (or correlated) with Ensurge Micropower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensurge Micropower ASA has no effect on the direction of World Technology i.e., World Technology and Ensurge Micropower go up and down completely randomly.

Pair Corralation between World Technology and Ensurge Micropower

Given the investment horizon of 90 days World Technology Corp is expected to generate 1.39 times more return on investment than Ensurge Micropower. However, World Technology is 1.39 times more volatile than Ensurge Micropower ASA. It trades about 0.19 of its potential returns per unit of risk. Ensurge Micropower ASA is currently generating about 0.07 per unit of risk. If you would invest  34.00  in World Technology Corp on December 28, 2024 and sell it today you would earn a total of  59.00  from holding World Technology Corp or generate 173.53% return on investment over 90 days.

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

World Technology Corp  vs.  Ensurge Micropower ASA

World Technology Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in World Technology Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, World Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ensurge Micropower ASA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ensurge Micropower ASA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Ensurge Micropower showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with World Technology and Ensurge Micropower

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

The idea behind World Technology Corp and Ensurge Micropower ASA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.