Correlation Between Wah Lee and WPG Holdings

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Can any of the company-specific risk be diversified away by investing in both Wah Lee and WPG Holdings 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 WPG Holdings 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 WPG Holdings, you can compare the effects of market volatilities on Wah Lee and WPG Holdings 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 WPG Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and WPG Holdings.

Diversification Opportunities for Wah Lee and WPG Holdings

WahWPGDiversified AwayWahWPGDiversified Away100%
0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Wah and WPG is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and WPG Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPG Holdings 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 WPG Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPG Holdings has no effect on the direction of Wah Lee i.e., Wah Lee and WPG Holdings go up and down completely randomly.

Pair Corralation between Wah Lee and WPG Holdings

Assuming the 90 days trading horizon Wah Lee Industrial is expected to generate 1.16 times more return on investment than WPG Holdings. However, Wah Lee is 1.16 times more volatile than WPG Holdings. It trades about 0.02 of its potential returns per unit of risk. WPG Holdings is currently generating about -0.06 per unit of risk. If you would invest  12,700  in Wah Lee Industrial on September 15, 2024 and sell it today you would earn a total of  150.00  from holding Wah Lee Industrial or generate 1.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wah Lee Industrial  vs.  WPG Holdings

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -6-4-20246
JavaScript chart by amCharts 3.21.153010 3702
       Timeline  
Wah Lee Industrial 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec118120122124126128130132134
WPG Holdings 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days WPG Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WPG Holdings is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec707274767880

Wah Lee and WPG Holdings Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.08-3.81-2.53-1.26-0.02131.242.543.845.146.44 0.050.100.150.20
JavaScript chart by amCharts 3.21.153010 3702
       Returns  

Pair Trading with Wah Lee and WPG Holdings

The main advantage of trading using opposite Wah Lee and WPG Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Lee position performs unexpectedly, WPG Holdings 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 WPG Holdings will offset losses from the drop in WPG Holdings' long position.
The idea behind Wah Lee Industrial and WPG Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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