Correlation Between WPG Holdings and Promate Electronic

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

By analyzing existing cross correlation between WPG Holdings and Promate Electronic Co, you can compare the effects of market volatilities on WPG Holdings and Promate Electronic 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 Promate Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPG Holdings and Promate Electronic.

Diversification Opportunities for WPG Holdings and Promate Electronic

0.52

Correlation Coefficient

WPG Holdings  Promate Electronic

Very weak diversification

The 3 months correlation between WPG and Promate is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding WPG Holdings and Promate Electronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Promate Electronic 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 Promate Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Promate Electronic has no effect on the direction of WPG Holdings i.e., WPG Holdings and Promate Electronic go up and down completely randomly.

Pair Corralation between WPG Holdings and Promate Electronic

Assuming the 90 days trading horizon WPG Holdings is expected to generate 2.13 times more return on investment than Promate Electronic. However, WPG Holdings is 2.13 times more volatile than Promate Electronic Co. It trades about 0.08 of its potential returns per unit of risk. Promate Electronic Co is currently generating about -0.19 per unit of risk. If you would invest  6,800  in WPG Holdings on October 20, 2024 and sell it today you would earn a total of  220.00  from holding WPG Holdings or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

WPG Holdings  vs.  Promate Electronic Co

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.

Promate Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Promate Electronic Co 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 Promate Electronic

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

The idea behind WPG Holdings and Promate Electronic Co 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.