Correlation Between Wah Lee and Advantech

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

By analyzing existing cross correlation between Wah Lee Industrial and Advantech Co, you can compare the effects of market volatilities on Wah Lee and Advantech 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 Wah Lee with a short position of Advantech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and Advantech.

Diversification Opportunities for Wah Lee and Advantech

-0.14

Correlation Coefficient

Wah Lee  Advantech

Good diversification

The 3 months correlation between Wah and Advantech is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and Wah Lee 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 Wah Lee Industrial are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Wah Lee i.e., Wah Lee and Advantech go up and down completely randomly.

Pair Corralation between Wah Lee and Advantech

Assuming the 90 days trading horizon Wah Lee Industrial is expected to under-perform the Advantech. But the stock apears to be less risky and, when comparing its historical volatility, Wah Lee Industrial is 1.14 times less risky than Advantech. The stock trades about -0.07 of its potential returns per unit of risk. The Advantech Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  32,800  in Advantech Co on October 20, 2024 and sell it today you would earn a total of  3,700  from holding Advantech Co or generate 11.28% return on investment over 90 days.

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

Wah Lee Industrial  vs.  Advantech Co

Wah Lee Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wah Lee Industrial 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.

Advantech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Advantech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Wah Lee and Advantech

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

The idea behind Wah Lee Industrial and Advantech 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.