Correlation Between Wah Hong and Chaheng Precision

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

Diversification Opportunities for Wah Hong and Chaheng Precision

-0.43

Correlation Coefficient

Wah Hong  Chaheng Precision

Very good diversification

The 3 months correlation between Wah and Chaheng is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Chaheng Precision Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chaheng Precision 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 Chaheng Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chaheng Precision has no effect on the direction of Wah Hong i.e., Wah Hong and Chaheng Precision go up and down completely randomly.

Pair Corralation between Wah Hong and Chaheng Precision

Assuming the 90 days trading horizon Wah Hong Industrial is expected to under-perform the Chaheng Precision. In addition to that, Wah Hong is 2.62 times more volatile than Chaheng Precision Co. It trades about -0.16 of its total potential returns per unit of risk. Chaheng Precision Co is currently generating about -0.08 per unit of volatility. If you would invest  9,220  in Chaheng Precision Co on September 22, 2024 and sell it today you would lose (230.00) from holding Chaheng Precision Co or give up 2.49% 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.  Chaheng Precision 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.

Chaheng Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chaheng Precision Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chaheng Precision 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 Chaheng Precision

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

The idea behind Wah Hong Industrial and Chaheng Precision 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.