Correlation Between WPG Holdings and Alltek Technology

Can any of the company-specific risk be diversified away by investing in both WPG Holdings and Alltek Technology 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 WPG Holdings and Alltek Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for WPG Holdings and Alltek Technology

0.59

Correlation Coefficient

WPG Holdings  Alltek Technology

Very weak diversification

The 3 months correlation between WPG and Alltek is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding WPG Holdings and Alltek Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alltek Technology Corp and WPG Holdings 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 WPG Holdings are associated (or correlated) with Alltek Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alltek Technology Corp has no effect on the direction of WPG Holdings i.e., WPG Holdings and Alltek Technology go up and down completely randomly.

Pair Corralation between WPG Holdings and Alltek Technology

Assuming the 90 days trading horizon WPG Holdings is expected to under-perform the Alltek Technology. But the stock apears to be less risky and, when comparing its historical volatility, WPG Holdings is 1.98 times less risky than Alltek Technology. The stock trades about -0.05 of its potential returns per unit of risk. The Alltek Technology Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,640  in Alltek Technology Corp on September 12, 2024 and sell it today you would lose (120.00) from holding Alltek Technology Corp or give up 3.3% of portfolio value over 90 days.

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

WPG Holdings  vs.  Alltek Technology Corp

WPG Holdings

Risk-Adjusted Performance

0 of 100

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.

Alltek Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alltek Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Alltek Technology 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 WPG Holdings and Alltek Technology

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

The idea behind WPG Holdings and Alltek Technology 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.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.