Correlation Between Wei Chuan and Iron Force

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

By analyzing existing cross correlation between Wei Chuan Foods and Iron Force Industrial, you can compare the effects of market volatilities on Wei Chuan and Iron Force 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 Wei Chuan with a short position of Iron Force. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Iron Force.

Diversification Opportunities for Wei Chuan and Iron Force

0.52

Correlation Coefficient

Wei Chuan  Iron Force

Very weak diversification

The 3 months correlation between Wei and Iron is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Iron Force Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iron Force Industrial and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Iron Force. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iron Force Industrial has no effect on the direction of Wei Chuan i.e., Wei Chuan and Iron Force go up and down completely randomly.

Pair Corralation between Wei Chuan and Iron Force

Assuming the 90 days trading horizon Wei Chuan Foods is expected to under-perform the Iron Force. But the stock apears to be less risky and, when comparing its historical volatility, Wei Chuan Foods is 3.55 times less risky than Iron Force. The stock trades about -0.04 of its potential returns per unit of risk. The Iron Force Industrial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,110  in Iron Force Industrial on October 22, 2024 and sell it today you would earn a total of  290.00  from holding Iron Force Industrial or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.56%
Values	Daily Returns

Wei Chuan Foods  vs.  Iron Force Industrial

Wei Chuan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wei Chuan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wei Chuan is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Iron Force Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Force Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Wei Chuan and Iron Force

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

The idea behind Wei Chuan Foods and Iron Force Industrial 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.