Correlation Between Wanhua Chemical and Integrated Electronic

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

By analyzing existing cross correlation between Wanhua Chemical Group and Integrated Electronic Systems, you can compare the effects of market volatilities on Wanhua Chemical and Integrated 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 Wanhua Chemical with a short position of Integrated Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wanhua Chemical and Integrated Electronic.

Diversification Opportunities for Wanhua Chemical and Integrated Electronic

0.02

Correlation Coefficient

Wanhua Chemical  Integrated Electronic

Significant diversification

The 3 months correlation between Wanhua and Integrated is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Wanhua Chemical Group and Integrated Electronic Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Electronic and Wanhua Chemical 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 Wanhua Chemical Group are associated (or correlated) with Integrated Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Electronic has no effect on the direction of Wanhua Chemical i.e., Wanhua Chemical and Integrated Electronic go up and down completely randomly.

Pair Corralation between Wanhua Chemical and Integrated Electronic

Assuming the 90 days trading horizon Wanhua Chemical is expected to generate 109.33 times less return on investment than Integrated Electronic. But when comparing it to its historical volatility, Wanhua Chemical Group is 1.53 times less risky than Integrated Electronic. It trades about 0.0 of its potential returns per unit of risk. Integrated Electronic Systems is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  545.00  in Integrated Electronic Systems on September 20, 2024 and sell it today you would earn a total of  423.00  from holding Integrated Electronic Systems or generate 77.61% return on investment over 90 days.

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

Wanhua Chemical Group  vs.  Integrated Electronic Systems

Wanhua Chemical Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wanhua Chemical Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Wanhua Chemical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Integrated Electronic

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Integrated Electronic Systems are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Integrated Electronic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wanhua Chemical and Integrated Electronic

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

The idea behind Wanhua Chemical Group and Integrated Electronic Systems 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.