Correlation Between Airtac International and Wan Hai

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

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

Diversification Opportunities for Airtac International and Wan Hai

0.09

Correlation Coefficient

Airtac International  Wan Hai

Significant diversification

The 3 months correlation between Airtac and Wan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Airtac International Group 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 Airtac International 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 Airtac International Group 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 Airtac International i.e., Airtac International and Wan Hai go up and down completely randomly.

Pair Corralation between Airtac International and Wan Hai

Assuming the 90 days trading horizon Airtac International is expected to generate 1.37 times less return on investment than Wan Hai. In addition to that, Airtac International is 1.21 times more volatile than Wan Hai Lines. It trades about 0.23 of its total potential returns per unit of risk. Wan Hai Lines is currently generating about 0.38 per unit of volatility. If you would invest  7,320  in Wan Hai Lines on December 4, 2024 and sell it today you would earn a total of  1,140  from holding Wan Hai Lines or generate 15.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Airtac International Group  vs.  Wan Hai Lines

Airtac International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airtac International Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Airtac International showed solid returns over the last few months and may actually be approaching a breakup point.

Wan Hai Lines

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Airtac International and Wan Hai

The main advantage of trading using opposite Airtac International and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Airtac International 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 Airtac International Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.