Correlation Between Wonbang Tech and HuMC

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

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

Diversification Opportunities for Wonbang Tech and HuMC

0.91

Correlation Coefficient

Wonbang Tech  HuMC

Almost no diversification

The 3 months correlation between Wonbang and HuMC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wonbang Tech Co and HuMC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HuMC and Wonbang Tech 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 Wonbang Tech Co are associated (or correlated) with HuMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HuMC has no effect on the direction of Wonbang Tech i.e., Wonbang Tech and HuMC go up and down completely randomly.

Pair Corralation between Wonbang Tech and HuMC

Assuming the 90 days trading horizon Wonbang Tech Co is expected to under-perform the HuMC. In addition to that, Wonbang Tech is 2.94 times more volatile than HuMC Co. It trades about -0.03 of its total potential returns per unit of risk. HuMC Co is currently generating about -0.06 per unit of volatility. If you would invest  109,700  in HuMC Co on September 25, 2024 and sell it today you would lose (11,100) from holding HuMC Co or give up 10.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.18%
Values	Daily Returns

Wonbang Tech Co  vs.  HuMC Co

Wonbang Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wonbang Tech Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HuMC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HuMC Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HuMC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wonbang Tech and HuMC

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

The idea behind Wonbang Tech Co and HuMC Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.