Correlation Between Wah Hong and Advantech

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

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

Diversification Opportunities for Wah Hong and Advantech

0.31

Correlation Coefficient

Wah Hong  Advantech

Weak diversification

The 3 months correlation between Wah and Advantech is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Advantech Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantech and Wah Hong 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 Wah Hong Industrial are associated (or correlated) with Advantech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantech has no effect on the direction of Wah Hong i.e., Wah Hong and Advantech go up and down completely randomly.

Pair Corralation between Wah Hong and Advantech

Assuming the 90 days trading horizon Wah Hong Industrial is expected to under-perform the Advantech. In addition to that, Wah Hong is 2.73 times more volatile than Advantech Co. It trades about -0.02 of its total potential returns per unit of risk. Advantech Co is currently generating about 0.08 per unit of volatility. If you would invest  32,150  in Advantech Co on September 22, 2024 and sell it today you would earn a total of  1,750  from holding Advantech Co or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.78%
Values	Daily Returns

Wah Hong Industrial  vs.  Advantech Co

Wah Hong Industrial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wah Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Advantech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advantech Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Advantech 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 Wah Hong and Advantech

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

The idea behind Wah Hong Industrial and Advantech 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.