Correlation Between WONIK Materials and Worldex Industry

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

By analyzing existing cross correlation between WONIK Materials CoLtd and Worldex Industry Trading, you can compare the effects of market volatilities on WONIK Materials and Worldex Industry 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 WONIK Materials with a short position of Worldex Industry. Check out your portfolio center. Please also check ongoing floating volatility patterns of WONIK Materials and Worldex Industry.

Diversification Opportunities for WONIK Materials and Worldex Industry

0.9

Correlation Coefficient

WONIK Materials  Worldex Industry

Almost no diversification

The 3 months correlation between WONIK and Worldex is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WONIK Materials CoLtd and Worldex Industry Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worldex Industry Trading and WONIK Materials 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 WONIK Materials CoLtd are associated (or correlated) with Worldex Industry. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worldex Industry Trading has no effect on the direction of WONIK Materials i.e., WONIK Materials and Worldex Industry go up and down completely randomly.

Pair Corralation between WONIK Materials and Worldex Industry

Assuming the 90 days trading horizon WONIK Materials CoLtd is expected to under-perform the Worldex Industry. In addition to that, WONIK Materials is 1.15 times more volatile than Worldex Industry Trading. It trades about -0.2 of its total potential returns per unit of risk. Worldex Industry Trading is currently generating about -0.11 per unit of volatility. If you would invest  1,961,000  in Worldex Industry Trading on September 20, 2024 and sell it today you would lose (282,000) from holding Worldex Industry Trading or give up 14.38% of portfolio value over 90 days.

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

WONIK Materials CoLtd  vs.  Worldex Industry Trading

WONIK Materials CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WONIK Materials CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Worldex Industry Trading

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Worldex Industry Trading has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with WONIK Materials and Worldex Industry

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

The idea behind WONIK Materials CoLtd and Worldex Industry Trading 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.

Check out your portfolio center.

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.