Correlation Between Hisense Home and Whirlpool

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

By analyzing existing cross correlation between Hisense Home Appliances and Whirlpool, you can compare the effects of market volatilities on Hisense Home and Whirlpool 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 Hisense Home with a short position of Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hisense Home and Whirlpool.

Diversification Opportunities for Hisense Home and Whirlpool

-0.43

Correlation Coefficient

Hisense Home  Whirlpool

Very good diversification

The 3 months correlation between Hisense and Whirlpool is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hisense Home Appliances and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool and Hisense Home 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 Hisense Home Appliances are associated (or correlated) with Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of Hisense Home i.e., Hisense Home and Whirlpool go up and down completely randomly.

Pair Corralation between Hisense Home and Whirlpool

Assuming the 90 days horizon Hisense Home Appliances is expected to under-perform the Whirlpool. In addition to that, Hisense Home is 1.81 times more volatile than Whirlpool. It trades about -0.02 of its total potential returns per unit of risk. Whirlpool is currently generating about 0.12 per unit of volatility. If you would invest  9,412  in Whirlpool on September 28, 2024 and sell it today you would earn a total of  1,558  from holding Whirlpool or generate 16.55% return on investment over 90 days.

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

Hisense Home Appliances  vs.  Whirlpool

Hisense Home Appliances

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hisense Home Appliances has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hisense Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Whirlpool

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hisense Home and Whirlpool

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

The idea behind Hisense Home Appliances and Whirlpool 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.