Correlation Between Waffer Technology and Wan Hai

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

By analyzing existing cross correlation between Waffer Technology Corp and Wan Hai Lines, you can compare the effects of market volatilities on Waffer Technology and Wan Hai 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 Waffer Technology with a short position of Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waffer Technology and Wan Hai.

Diversification Opportunities for Waffer Technology and Wan Hai

0.21

Correlation Coefficient

Waffer Technology  Wan Hai

Modest diversification

The 3 months correlation between Waffer and Wan is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Waffer Technology Corp and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines and Waffer Technology 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 Waffer Technology Corp are associated (or correlated) with Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Waffer Technology i.e., Waffer Technology and Wan Hai go up and down completely randomly.

Pair Corralation between Waffer Technology and Wan Hai

Assuming the 90 days trading horizon Waffer Technology Corp is expected to generate 1.02 times more return on investment than Wan Hai. However, Waffer Technology is 1.02 times more volatile than Wan Hai Lines. It trades about 0.02 of its potential returns per unit of risk. Wan Hai Lines is currently generating about -0.28 per unit of risk. If you would invest  6,640  in Waffer Technology Corp on September 18, 2024 and sell it today you would earn a total of  40.00  from holding Waffer Technology Corp or generate 0.6% return on investment over 90 days.

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

Waffer Technology Corp  vs.  Wan Hai Lines

Waffer Technology Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waffer Technology Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Waffer Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wan Hai Lines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wan Hai Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Wan Hai is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Waffer Technology and Wan Hai

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

The idea behind Waffer Technology Corp and Wan Hai Lines 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.