Correlation Between Wolfspeed and Amkor Technology

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

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

Diversification Opportunities for Wolfspeed and Amkor Technology

0.35

Correlation Coefficient

Wolfspeed  Amkor Technology

Weak diversification

The 3 months correlation between Wolfspeed and Amkor is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wolfspeed and Amkor Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amkor Technology and Wolfspeed 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 Wolfspeed are associated (or correlated) with Amkor Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amkor Technology has no effect on the direction of Wolfspeed i.e., Wolfspeed and Amkor Technology go up and down completely randomly.

Pair Corralation between Wolfspeed and Amkor Technology

Given the investment horizon of 90 days Wolfspeed is expected to under-perform the Amkor Technology. In addition to that, Wolfspeed is 4.09 times more volatile than Amkor Technology. It trades about -0.08 of its total potential returns per unit of risk. Amkor Technology is currently generating about -0.07 per unit of volatility. If you would invest  2,606  in Amkor Technology on September 23, 2024 and sell it today you would lose (79.00) from holding Amkor Technology or give up 3.03% of portfolio value over 90 days.

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

Wolfspeed  vs.  Amkor Technology

Wolfspeed

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wolfspeed are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Wolfspeed reported solid returns over the last few months and may actually be approaching a breakup point.

Amkor Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amkor Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Wolfspeed and Amkor Technology

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

The idea behind Wolfspeed and Amkor 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.