Correlation Between Wah Hong and Dimension Computer

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

Diversification Opportunities for Wah Hong and Dimension Computer

0.24

Correlation Coefficient

Wah Hong  Dimension Computer

Modest diversification

The 3 months correlation between Wah and Dimension is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Dimension Computer Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimension Computer 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 Dimension Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimension Computer has no effect on the direction of Wah Hong i.e., Wah Hong and Dimension Computer go up and down completely randomly.

Pair Corralation between Wah Hong and Dimension Computer

Assuming the 90 days trading horizon Wah Hong Industrial is expected to under-perform the Dimension Computer. But the stock apears to be less risky and, when comparing its historical volatility, Wah Hong Industrial is 2.32 times less risky than Dimension Computer. The stock trades about -0.04 of its potential returns per unit of risk. The Dimension Computer Technology is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,510  in Dimension Computer Technology on December 24, 2024 and sell it today you would earn a total of  1,370  from holding Dimension Computer Technology or generate 54.58% return on investment over 90 days.

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

Wah Hong Industrial  vs.  Dimension Computer Technology

Wah Hong Industrial

Risk-Adjusted Performance

Very Weak

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

Dimension Computer

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dimension Computer Technology are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dimension Computer showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wah Hong and Dimension Computer

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

The idea behind Wah Hong Industrial and Dimension Computer Technology 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.