Correlation Between Wan Hai and Hsin Ba

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

Diversification Opportunities for Wan Hai and Hsin Ba

0.22

Correlation Coefficient

Wan Hai  Hsin Ba

Modest diversification

The 3 months correlation between Wan and Hsin is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Hsin Ba Ba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsin Ba Ba 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 Hsin Ba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsin Ba Ba has no effect on the direction of Wan Hai i.e., Wan Hai and Hsin Ba go up and down completely randomly.

Pair Corralation between Wan Hai and Hsin Ba

Assuming the 90 days trading horizon Wan Hai Lines is expected to generate 0.91 times more return on investment than Hsin Ba. However, Wan Hai Lines is 1.1 times less risky than Hsin Ba. It trades about 0.03 of its potential returns per unit of risk. Hsin Ba Ba is currently generating about -0.05 per unit of risk. If you would invest  8,230  in Wan Hai Lines on December 26, 2024 and sell it today you would earn a total of  190.00  from holding Wan Hai Lines or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.21%
Values	Daily Returns

Wan Hai Lines  vs.  Hsin Ba Ba

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.

Hsin Ba Ba

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hsin Ba Ba has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Wan Hai and Hsin Ba

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

The idea behind Wan Hai Lines and Hsin Ba Ba 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.