Correlation Between Weikeng Industrial and Test Research

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

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

Diversification Opportunities for Weikeng Industrial and Test Research

0.73

Correlation Coefficient

Weikeng Industrial  Test Research

Poor diversification

The 3 months correlation between Weikeng and Test is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Weikeng Industrial Co and Test Research in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Test Research and Weikeng Industrial 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 Weikeng Industrial Co 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 Weikeng Industrial i.e., Weikeng Industrial and Test Research go up and down completely randomly.

Pair Corralation between Weikeng Industrial and Test Research

Assuming the 90 days trading horizon Weikeng Industrial Co is expected to under-perform the Test Research. But the stock apears to be less risky and, when comparing its historical volatility, Weikeng Industrial Co is 2.22 times less risky than Test Research. The stock trades about -0.21 of its potential returns per unit of risk. The Test Research is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  12,350  in Test Research on October 10, 2024 and sell it today you would lose (450.00) from holding Test Research or give up 3.64% of portfolio value over 90 days.

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

Weikeng Industrial Co  vs.  Test Research

Weikeng Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weikeng Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Weikeng Industrial 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 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 Weikeng Industrial and Test Research

The main advantage of trading using opposite Weikeng Industrial and Test Research positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weikeng Industrial 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 Weikeng Industrial Co 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 CEOs Directory module to screen CEOs from public companies around the world.