Correlation Between Wah Hong and I Jang

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

Diversification Opportunities for Wah Hong and I Jang

-0.43

Correlation Coefficient

Wah Hong  I Jang

Very good diversification

The 3 months correlation between Wah and 8342 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and I Jang Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on I Jang Industrial 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 I Jang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of I Jang Industrial has no effect on the direction of Wah Hong i.e., Wah Hong and I Jang go up and down completely randomly.

Pair Corralation between Wah Hong and I Jang

Assuming the 90 days trading horizon Wah Hong Industrial is expected to generate 3.72 times more return on investment than I Jang. However, Wah Hong is 3.72 times more volatile than I Jang Industrial. It trades about 0.08 of its potential returns per unit of risk. I Jang Industrial is currently generating about -0.03 per unit of risk. If you would invest  3,675  in Wah Hong Industrial on September 25, 2024 and sell it today you would earn a total of  625.00  from holding Wah Hong Industrial or generate 17.01% return on investment over 90 days.

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

Wah Hong Industrial  vs.  I Jang Industrial

Wah Hong Industrial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 6 (%) 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.

I Jang Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Wah Hong Industrial and I Jang Industrial 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.