Correlation Between Wah Lee and Polytronics Technology

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

Diversification Opportunities for Wah Lee and Polytronics Technology

0.73

Correlation Coefficient

Wah Lee  Polytronics Technology

Poor diversification

The 3 months correlation between Wah and Polytronics is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Polytronics Technology Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polytronics Technology 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 Polytronics Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polytronics Technology has no effect on the direction of Wah Lee i.e., Wah Lee and Polytronics Technology go up and down completely randomly.

Pair Corralation between Wah Lee and Polytronics Technology

Assuming the 90 days trading horizon Wah Lee Industrial is expected to under-perform the Polytronics Technology. But the stock apears to be less risky and, when comparing its historical volatility, Wah Lee Industrial is 1.14 times less risky than Polytronics Technology. The stock trades about -0.29 of its potential returns per unit of risk. The Polytronics Technology Corp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  5,750  in Polytronics Technology Corp on December 30, 2024 and sell it today you would lose (630.00) from holding Polytronics Technology Corp or give up 10.96% of portfolio value over 90 days.

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

Wah Lee Industrial  vs.  Polytronics Technology Corp

Wah Lee Industrial

Risk-Adjusted Performance

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 abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Polytronics Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polytronics Technology Corp 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 Wah Lee and Polytronics Technology

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

The idea behind Wah Lee Industrial and Polytronics Technology Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.