Correlation Between TECO Electric and Wan Hai

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

By analyzing existing cross correlation between TECO Electric Machinery and Wan Hai Lines, you can compare the effects of market volatilities on TECO Electric and Wan Hai 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 TECO Electric with a short position of Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of TECO Electric and Wan Hai.

Diversification Opportunities for TECO Electric and Wan Hai

0.0

Correlation Coefficient

TECO Electric  Wan Hai

Pay attention - limited upside

The 3 months correlation between TECO and Wan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding TECO Electric Machinery and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines and TECO Electric 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 TECO Electric Machinery are associated (or correlated) with Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of TECO Electric i.e., TECO Electric and Wan Hai go up and down completely randomly.

Pair Corralation between TECO Electric and Wan Hai

Assuming the 90 days trading horizon TECO Electric is expected to generate 5.04 times less return on investment than Wan Hai. But when comparing it to its historical volatility, TECO Electric Machinery is 1.76 times less risky than Wan Hai. It trades about 0.03 of its potential returns per unit of risk. Wan Hai Lines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,695  in Wan Hai Lines on September 15, 2024 and sell it today you would earn a total of  3,525  from holding Wan Hai Lines or generate 75.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

TECO Electric Machinery  vs.  Wan Hai Lines

TECO Electric Machinery

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TECO Electric Machinery are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, TECO Electric is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wan Hai Lines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wan Hai Lines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wan Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with TECO Electric and Wan Hai

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

The idea behind TECO Electric Machinery and Wan Hai Lines 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.