Correlation Between WONIK Materials and Withuspharmaceutical

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

Diversification Opportunities for WONIK Materials and Withuspharmaceutical

0.76

Correlation Coefficient

WONIK Materials  Withuspharmaceutical

Poor diversification

The 3 months correlation between WONIK and Withuspharmaceutical is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding WONIK Materials CoLtd and Withuspharmaceutical CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Withuspharmaceutical 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 Withuspharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Withuspharmaceutical has no effect on the direction of WONIK Materials i.e., WONIK Materials and Withuspharmaceutical go up and down completely randomly.

Pair Corralation between WONIK Materials and Withuspharmaceutical

Assuming the 90 days trading horizon WONIK Materials CoLtd is expected to under-perform the Withuspharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, WONIK Materials CoLtd is 1.14 times less risky than Withuspharmaceutical. The stock trades about -0.26 of its potential returns per unit of risk. The Withuspharmaceutical CoLtd is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  720,000  in Withuspharmaceutical CoLtd on September 13, 2024 and sell it today you would lose (60,000) from holding Withuspharmaceutical CoLtd or give up 8.33% of portfolio value over 90 days.

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

WONIK Materials CoLtd  vs.  Withuspharmaceutical CoLtd

WONIK Materials CoLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WONIK Materials CoLtd 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.

Withuspharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Withuspharmaceutical CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with WONIK Materials and Withuspharmaceutical

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

The idea behind WONIK Materials CoLtd and Withuspharmaceutical CoLtd 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.