Correlation Between Wah Lee and Test Research

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

Diversification Opportunities for Wah Lee and Test Research

0.41

Correlation Coefficient

Wah Lee  Test Research

Very weak diversification

The 3 months correlation between Wah and Test is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research 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 Test Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Test Research has no effect on the direction of Wah Lee i.e., Wah Lee and Test Research go up and down completely randomly.

Pair Corralation between Wah Lee and Test Research

Assuming the 90 days trading horizon Wah Lee is expected to generate 1.65 times less return on investment than Test Research. But when comparing it to its historical volatility, Wah Lee Industrial is 1.32 times less risky than Test Research. It trades about 0.06 of its potential returns per unit of risk. Test Research is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,290  in Test Research on September 16, 2024 and sell it today you would earn a total of  5,810  from holding Test Research or generate 92.37% return on investment over 90 days.

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

Wah Lee Industrial  vs.  Test Research

Wah Lee Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Lee Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wah Lee is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Test Research

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Test Research 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 January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Wah Lee and Test Research

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

The idea behind Wah Lee Industrial and Test Research 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.