Correlation Between Wan Hai and Taiwan Taomee

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

Diversification Opportunities for Wan Hai and Taiwan Taomee

-0.07

Correlation Coefficient

Wan Hai  Taiwan Taomee

Good diversification

The 3 months correlation between Wan and Taiwan is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Taiwan Taomee Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taomee 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 Taiwan Taomee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taomee has no effect on the direction of Wan Hai i.e., Wan Hai and Taiwan Taomee go up and down completely randomly.

Pair Corralation between Wan Hai and Taiwan Taomee

Assuming the 90 days trading horizon Wan Hai Lines is expected to under-perform the Taiwan Taomee. In addition to that, Wan Hai is 1.69 times more volatile than Taiwan Taomee Co. It trades about -0.23 of its total potential returns per unit of risk. Taiwan Taomee Co is currently generating about -0.26 per unit of volatility. If you would invest  1,060  in Taiwan Taomee Co on October 26, 2024 and sell it today you would lose (60.00) from holding Taiwan Taomee Co or give up 5.66% of portfolio value over 90 days.

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

Wan Hai Lines  vs.  Taiwan Taomee Co

Wan Hai Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wan Hai Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Taiwan Taomee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Taomee Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Taomee 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 Wan Hai and Taiwan Taomee

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

The idea behind Wan Hai Lines and Taiwan Taomee 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.