Correlation Between Wan Hai and Kedge Construction

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

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

Diversification Opportunities for Wan Hai and Kedge Construction

0.64

Correlation Coefficient

Wan Hai  Kedge Construction

Poor diversification

The 3 months correlation between Wan and Kedge is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Kedge Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kedge Construction and Wan Hai 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 Wan Hai Lines are associated (or correlated) with Kedge Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kedge Construction has no effect on the direction of Wan Hai i.e., Wan Hai and Kedge Construction go up and down completely randomly.

Pair Corralation between Wan Hai and Kedge Construction

Assuming the 90 days trading horizon Wan Hai is expected to generate 4.42 times less return on investment than Kedge Construction. In addition to that, Wan Hai is 1.13 times more volatile than Kedge Construction Co. It trades about 0.03 of its total potential returns per unit of risk. Kedge Construction Co is currently generating about 0.14 per unit of volatility. If you would invest  7,040  in Kedge Construction Co on December 28, 2024 and sell it today you would earn a total of  1,030  from holding Kedge Construction Co or generate 14.63% return on investment over 90 days.

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

Wan Hai Lines  vs.  Kedge Construction Co

Wan Hai Lines

Risk-Adjusted Performance

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.

Kedge Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kedge Construction Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kedge Construction showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wan Hai and Kedge Construction

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

The idea behind Wan Hai Lines and Kedge Construction Co 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.