Correlation Between Wah Hong and Sporton International

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

Diversification Opportunities for Wah Hong and Sporton International

-0.61

Correlation Coefficient

Wah Hong  Sporton International

Excellent diversification

The 3 months correlation between Wah and Sporton is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Sporton International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporton International 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 Sporton International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporton International has no effect on the direction of Wah Hong i.e., Wah Hong and Sporton International go up and down completely randomly.

Pair Corralation between Wah Hong and Sporton International

Assuming the 90 days trading horizon Wah Hong Industrial is expected to generate 3.38 times more return on investment than Sporton International. However, Wah Hong is 3.38 times more volatile than Sporton International. It trades about 0.15 of its potential returns per unit of risk. Sporton International is currently generating about -0.05 per unit of risk. If you would invest  3,280  in Wah Hong Industrial on September 4, 2024 and sell it today you would earn a total of  1,300  from holding Wah Hong Industrial or generate 39.63% return on investment over 90 days.

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

Wah Hong Industrial  vs.  Sporton International

Wah Hong Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 11 (%) 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.

Sporton International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sporton International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sporton International 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 Hong and Sporton International

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

The idea behind Wah Hong Industrial and Sporton International 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.