Correlation Between Hota Industrial and Wan Hai

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

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

Diversification Opportunities for Hota Industrial and Wan Hai

0.76

Correlation Coefficient

Hota Industrial  Wan Hai

Poor diversification

The 3 months correlation between Hota and Wan is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hota Industrial Mfg 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 Hota Industrial 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 Hota Industrial Mfg 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 Hota Industrial i.e., Hota Industrial and Wan Hai go up and down completely randomly.

Pair Corralation between Hota Industrial and Wan Hai

Assuming the 90 days trading horizon Hota Industrial Mfg is expected to generate 1.61 times more return on investment than Wan Hai. However, Hota Industrial is 1.61 times more volatile than Wan Hai Lines. It trades about 0.08 of its potential returns per unit of risk. Wan Hai Lines is currently generating about 0.07 per unit of risk. If you would invest  6,390  in Hota Industrial Mfg on December 20, 2024 and sell it today you would earn a total of  790.00  from holding Hota Industrial Mfg or generate 12.36% return on investment over 90 days.

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

Hota Industrial Mfg  vs.  Wan Hai Lines

Hota Industrial Mfg

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hota Industrial Mfg are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hota Industrial showed solid returns over the last few months and may actually be approaching a breakup point.

Wan Hai Lines

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wan Hai Lines are ranked lower than 5 (%) 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 April 2025.

Pair Trading with Hota Industrial and Wan Hai

The main advantage of trading using opposite Hota Industrial and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hota Industrial 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 Hota Industrial Mfg 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.