Correlation Between Hi Lai and Wowprime Corp

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

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

Diversification Opportunities for Hi Lai and Wowprime Corp

0.65

Correlation Coefficient

Hi Lai  Wowprime Corp

Poor diversification

The 3 months correlation between 1268 and Wowprime is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hi Lai Foods Co and Wowprime Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wowprime Corp and Hi Lai 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 Hi Lai Foods Co are associated (or correlated) with Wowprime Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wowprime Corp has no effect on the direction of Hi Lai i.e., Hi Lai and Wowprime Corp go up and down completely randomly.

Pair Corralation between Hi Lai and Wowprime Corp

Assuming the 90 days trading horizon Hi Lai Foods Co is expected to under-perform the Wowprime Corp. But the stock apears to be less risky and, when comparing its historical volatility, Hi Lai Foods Co is 1.5 times less risky than Wowprime Corp. The stock trades about -0.06 of its potential returns per unit of risk. The Wowprime Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  22,100  in Wowprime Corp on September 1, 2024 and sell it today you would earn a total of  1,000.00  from holding Wowprime Corp or generate 4.52% return on investment over 90 days.

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

Hi Lai Foods Co  vs.  Wowprime Corp

Hi Lai Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hi Lai Foods Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hi Lai is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wowprime Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wowprime Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wowprime Corp 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 Hi Lai and Wowprime Corp

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

The idea behind Hi Lai Foods Co and Wowprime Corp 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.