Correlation Between Advantech and Wah Hong

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

By analyzing existing cross correlation between Advantech Co and Wah Hong Industrial, you can compare the effects of market volatilities on Advantech and Wah Hong 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 Advantech with a short position of Wah Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Advantech and Wah Hong.

Diversification Opportunities for Advantech and Wah Hong

0.31

Correlation Coefficient

Advantech  Wah Hong

Weak diversification

The 3 months correlation between Advantech and Wah is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Advantech Co and Wah Hong Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Hong Industrial and Advantech 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 Advantech Co are associated (or correlated) with Wah Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Hong Industrial has no effect on the direction of Advantech i.e., Advantech and Wah Hong go up and down completely randomly.

Pair Corralation between Advantech and Wah Hong

Assuming the 90 days trading horizon Advantech Co is expected to generate 0.52 times more return on investment than Wah Hong. However, Advantech Co is 1.91 times less risky than Wah Hong. It trades about -0.01 of its potential returns per unit of risk. Wah Hong Industrial is currently generating about -0.16 per unit of risk. If you would invest  34,200  in Advantech Co on September 22, 2024 and sell it today you would lose (300.00) from holding Advantech Co or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Advantech Co  vs.  Wah Hong Industrial

Advantech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advantech is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wah Hong Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wah Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Advantech and Wah Hong

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

The idea behind Advantech Co and Wah Hong 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.