Correlation Between Wah Hong and WINSON Machinery

Can any of the company-specific risk be diversified away by investing in both Wah Hong and WINSON Machinery 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 WINSON Machinery 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 WINSON Machinery Co, you can compare the effects of market volatilities on Wah Hong and WINSON Machinery 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 WINSON Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Hong and WINSON Machinery.

Diversification Opportunities for Wah Hong and WINSON Machinery

-0.53

Correlation Coefficient

Wah Hong  WINSON Machinery

Excellent diversification

The 3 months correlation between Wah and WINSON is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and WINSON Machinery Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WINSON Machinery 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 WINSON Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WINSON Machinery has no effect on the direction of Wah Hong i.e., Wah Hong and WINSON Machinery go up and down completely randomly.

Pair Corralation between Wah Hong and WINSON Machinery

Assuming the 90 days trading horizon Wah Hong Industrial is expected to generate 0.97 times more return on investment than WINSON Machinery. However, Wah Hong Industrial is 1.03 times less risky than WINSON Machinery. It trades about -0.08 of its potential returns per unit of risk. WINSON Machinery Co is currently generating about -0.25 per unit of risk. If you would invest  4,755  in Wah Hong Industrial on September 29, 2024 and sell it today you would lose (180.00) from holding Wah Hong Industrial or give up 3.79% of portfolio value over 90 days.

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

Wah Hong Industrial  vs.  WINSON Machinery Co

Wah Hong Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 8 (%) 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.

WINSON Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WINSON Machinery 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 Wah Hong and WINSON Machinery

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

The idea behind Wah Hong Industrial and WINSON Machinery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.