Correlation Between Wah Hong and K Laser

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

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

Diversification Opportunities for Wah Hong and K Laser

-0.45

Correlation Coefficient

Wah Hong  K Laser

Very good diversification

The 3 months correlation between Wah and 2461 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and K Laser Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K Laser Technology and Wah Hong 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 Hong Industrial are associated (or correlated) with K Laser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K Laser Technology has no effect on the direction of Wah Hong i.e., Wah Hong and K Laser go up and down completely randomly.

Pair Corralation between Wah Hong and K Laser

Assuming the 90 days trading horizon Wah Hong Industrial is expected to generate 1.33 times more return on investment than K Laser. However, Wah Hong is 1.33 times more volatile than K Laser Technology. It trades about 0.05 of its potential returns per unit of risk. K Laser Technology is currently generating about 0.01 per unit of risk. If you would invest  2,752  in Wah Hong Industrial on September 22, 2024 and sell it today you would earn a total of  1,518  from holding Wah Hong Industrial or generate 55.16% return on investment over 90 days.

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

Wah Hong Industrial  vs.  K Laser Technology

Wah Hong Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wah Hong showed solid returns over the last few months and may actually be approaching a breakup point.

K Laser Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K Laser Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Wah Hong and K Laser

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

The idea behind Wah Hong Industrial and K Laser Technology 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.