Correlation Between Lotes and Wah Lee

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

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

Diversification Opportunities for Lotes and Wah Lee

0.91

Correlation Coefficient

Lotes  Wah Lee

Almost no diversification

The 3 months correlation between Lotes and Wah is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Lotes Co and Wah Lee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Lee Industrial and Lotes 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 Lotes Co are associated (or correlated) with Wah Lee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Lee Industrial has no effect on the direction of Lotes i.e., Lotes and Wah Lee go up and down completely randomly.

Pair Corralation between Lotes and Wah Lee

Assuming the 90 days trading horizon Lotes Co is expected to under-perform the Wah Lee. In addition to that, Lotes is 2.42 times more volatile than Wah Lee Industrial. It trades about -0.13 of its total potential returns per unit of risk. Wah Lee Industrial is currently generating about -0.27 per unit of volatility. If you would invest  12,800  in Wah Lee Industrial on December 26, 2024 and sell it today you would lose (2,050) from holding Wah Lee Industrial or give up 16.02% of portfolio value over 90 days.

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

Lotes Co  vs.  Wah Lee Industrial

Lotes

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lotes Co 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.

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.

Pair Trading with Lotes and Wah Lee

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

The idea behind Lotes Co and Wah Lee Industrial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.