Correlation Between WPG Holdings and Ten Ren

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

By analyzing existing cross correlation between WPG Holdings and Ten Ren Tea, you can compare the effects of market volatilities on WPG Holdings and Ten Ren 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 WPG Holdings with a short position of Ten Ren. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPG Holdings and Ten Ren.

Diversification Opportunities for WPG Holdings and Ten Ren

0.66

Correlation Coefficient

WPG Holdings  Ten Ren

Poor diversification

The 3 months correlation between WPG and Ten is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WPG Holdings and Ten Ren Tea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ten Ren Tea and WPG Holdings 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 WPG Holdings are associated (or correlated) with Ten Ren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ten Ren Tea has no effect on the direction of WPG Holdings i.e., WPG Holdings and Ten Ren go up and down completely randomly.

Pair Corralation between WPG Holdings and Ten Ren

Assuming the 90 days trading horizon WPG Holdings is expected to generate 2.22 times more return on investment than Ten Ren. However, WPG Holdings is 2.22 times more volatile than Ten Ren Tea. It trades about 0.05 of its potential returns per unit of risk. Ten Ren Tea is currently generating about -0.01 per unit of risk. If you would invest  4,825  in WPG Holdings on October 11, 2024 and sell it today you would earn a total of  2,245  from holding WPG Holdings or generate 46.53% return on investment over 90 days.

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

WPG Holdings  vs.  Ten Ren Tea

WPG Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPG Holdings 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.

Ten Ren Tea

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ten Ren Tea 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 WPG Holdings and Ten Ren

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

The idea behind WPG Holdings and Ten Ren Tea 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.