Correlation Between Wan Hai and Chien Kuo

Can any of the company-specific risk be diversified away by investing in both Wan Hai and Chien Kuo 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 Chien Kuo 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 Chien Kuo Construction, you can compare the effects of market volatilities on Wan Hai and Chien Kuo 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 Chien Kuo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Chien Kuo.

Diversification Opportunities for Wan Hai and Chien Kuo

0.05

Correlation Coefficient

Wan Hai  Chien Kuo

Significant diversification

The 3 months correlation between Wan and Chien is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Chien Kuo Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chien Kuo 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 Chien Kuo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chien Kuo Construction has no effect on the direction of Wan Hai i.e., Wan Hai and Chien Kuo go up and down completely randomly.

Pair Corralation between Wan Hai and Chien Kuo

Assuming the 90 days trading horizon Wan Hai is expected to generate 2.38 times less return on investment than Chien Kuo. In addition to that, Wan Hai is 1.18 times more volatile than Chien Kuo Construction. It trades about 0.04 of its total potential returns per unit of risk. Chien Kuo Construction is currently generating about 0.11 per unit of volatility. If you would invest  2,325  in Chien Kuo Construction on September 15, 2024 and sell it today you would earn a total of  460.00  from holding Chien Kuo Construction or generate 19.78% return on investment over 90 days.

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

Wan Hai Lines  vs.  Chien Kuo Construction

Wan Hai Lines

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wan Hai Lines are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wan Hai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chien Kuo Construction

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wan Hai and Chien Kuo

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

The idea behind Wan Hai Lines and Chien Kuo Construction 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.