Correlation Between WONIK Materials and RedcapTour

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

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

Diversification Opportunities for WONIK Materials and RedcapTour

0.8

Correlation Coefficient

WONIK Materials  RedcapTour

Very poor diversification

The 3 months correlation between WONIK and RedcapTour is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding WONIK Materials CoLtd and RedcapTour Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RedcapTour and WONIK Materials 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 WONIK Materials CoLtd are associated (or correlated) with RedcapTour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RedcapTour has no effect on the direction of WONIK Materials i.e., WONIK Materials and RedcapTour go up and down completely randomly.

Pair Corralation between WONIK Materials and RedcapTour

Assuming the 90 days trading horizon WONIK Materials is expected to generate 1.27 times less return on investment than RedcapTour. But when comparing it to its historical volatility, WONIK Materials CoLtd is 1.52 times less risky than RedcapTour. It trades about 0.15 of its potential returns per unit of risk. RedcapTour Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  752,060  in RedcapTour Co on December 25, 2024 and sell it today you would earn a total of  234,940  from holding RedcapTour Co or generate 31.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.25%
Values	Daily Returns

WONIK Materials CoLtd  vs.  RedcapTour Co

WONIK Materials CoLtd

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WONIK Materials CoLtd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WONIK Materials sustained solid returns over the last few months and may actually be approaching a breakup point.

RedcapTour

Risk-Adjusted Performance

OK

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

Pair Trading with WONIK Materials and RedcapTour

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

The idea behind WONIK Materials CoLtd and RedcapTour 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..