Correlation Between Wan Hai and FSP Technology
Can any of the company-specific risk be diversified away by investing in both Wan Hai and FSP Technology 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 FSP Technology 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 FSP Technology, you can compare the effects of market volatilities on Wan Hai and FSP Technology 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 FSP Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and FSP Technology.
Diversification Opportunities for Wan Hai and FSP Technology
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Wan and FSP is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and FSP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FSP Technology 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 FSP Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FSP Technology has no effect on the direction of Wan Hai i.e., Wan Hai and FSP Technology go up and down completely randomly.
Pair Corralation between Wan Hai and FSP Technology
Assuming the 90 days trading horizon Wan Hai Lines is expected to generate 0.9 times more return on investment than FSP Technology. However, Wan Hai Lines is 1.11 times less risky than FSP Technology. It trades about -0.01 of its potential returns per unit of risk. FSP Technology is currently generating about -0.01 per unit of risk. If you would invest 8,630 in Wan Hai Lines on December 4, 2024 and sell it today you would lose (170.00) from holding Wan Hai Lines or give up 1.97% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Wan Hai Lines vs. FSP Technology
Performance |
Timeline |
Wan Hai Lines |
FSP Technology |
Wan Hai and FSP Technology Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wan Hai and FSP Technology
The main advantage of trading using opposite Wan Hai and FSP Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, FSP Technology 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 FSP Technology will offset losses from the drop in FSP Technology's long position.Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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