Correlation Between Wah Lee and Weikeng Industrial

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

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

Diversification Opportunities for Wah Lee and Weikeng Industrial

-0.01

Correlation Coefficient

Wah Lee  Weikeng Industrial

Good diversification

The 3 months correlation between Wah and Weikeng is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Weikeng Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weikeng Industrial and Wah Lee 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 Wah Lee Industrial are associated (or correlated) with Weikeng Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weikeng Industrial has no effect on the direction of Wah Lee i.e., Wah Lee and Weikeng Industrial go up and down completely randomly.

Pair Corralation between Wah Lee and Weikeng Industrial

Assuming the 90 days trading horizon Wah Lee is expected to generate 2.14 times less return on investment than Weikeng Industrial. In addition to that, Wah Lee is 1.47 times more volatile than Weikeng Industrial Co. It trades about 0.02 of its total potential returns per unit of risk. Weikeng Industrial Co is currently generating about 0.05 per unit of volatility. If you would invest  3,340  in Weikeng Industrial Co on September 12, 2024 and sell it today you would earn a total of  105.00  from holding Weikeng Industrial Co or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Wah Lee Industrial  vs.  Weikeng Industrial Co

Wah Lee Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Lee Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wah Lee is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Weikeng Industrial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weikeng Industrial Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Weikeng Industrial 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 Wah Lee and Weikeng Industrial

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

The idea behind Wah Lee Industrial and Weikeng Industrial Co 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.