Correlation Between Zenitron Corp and Wah Lee

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

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

Diversification Opportunities for Zenitron Corp and Wah Lee

-0.26

Correlation Coefficient

Zenitron Corp  Wah Lee

Very good diversification

The 3 months correlation between Zenitron and Wah is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Zenitron Corp and Wah Lee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Lee Industrial and Zenitron Corp 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 Zenitron Corp are associated (or correlated) with Wah Lee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Lee Industrial has no effect on the direction of Zenitron Corp i.e., Zenitron Corp and Wah Lee go up and down completely randomly.

Pair Corralation between Zenitron Corp and Wah Lee

Assuming the 90 days trading horizon Zenitron Corp is expected to under-perform the Wah Lee. But the stock apears to be less risky and, when comparing its historical volatility, Zenitron Corp is 1.84 times less risky than Wah Lee. The stock trades about -0.06 of its potential returns per unit of risk. The Wah Lee Industrial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12,700  in Wah Lee Industrial on September 14, 2024 and sell it today you would lose (50.00) from holding Wah Lee Industrial or give up 0.39% of portfolio value over 90 days.

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

Zenitron Corp  vs.  Wah Lee Industrial

Zenitron Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wah Lee Industrial

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Wah Lee Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Zenitron Corp and Wah Lee

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

The idea behind Zenitron Corp and Wah Lee Industrial 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.