Correlation Between Hold Key and Wan Hai

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

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

Diversification Opportunities for Hold Key and Wan Hai

0.32

Correlation Coefficient

Hold Key  Wan Hai

Weak diversification

The 3 months correlation between Hold and Wan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hold Key Electric Wire 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 Hold Key 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 Hold Key Electric Wire 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 Hold Key i.e., Hold Key and Wan Hai go up and down completely randomly.

Pair Corralation between Hold Key and Wan Hai

Assuming the 90 days trading horizon Hold Key Electric Wire is expected to generate 1.04 times more return on investment than Wan Hai. However, Hold Key is 1.04 times more volatile than Wan Hai Lines. It trades about 0.02 of its potential returns per unit of risk. Wan Hai Lines is currently generating about -0.03 per unit of risk. If you would invest  4,220  in Hold Key Electric Wire on September 17, 2024 and sell it today you would earn a total of  45.00  from holding Hold Key Electric Wire or generate 1.07% return on investment over 90 days.

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

Hold Key Electric Wire  vs.  Wan Hai Lines

Hold Key Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hold Key Electric Wire has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hold Key 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

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wan Hai Lines are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Hold Key and Wan Hai

The main advantage of trading using opposite Hold Key and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hold Key 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 Hold Key Electric Wire 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.