Correlation Between Wah Hong and Tycoons Worldwide

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

Diversification Opportunities for Wah Hong and Tycoons Worldwide

-0.74

Correlation Coefficient

Wah Hong  Tycoons Worldwide

Pay attention - limited upside

The 3 months correlation between Wah and Tycoons is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wah Hong Industrial and Tycoons Worldwide Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tycoons Worldwide 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 Tycoons Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tycoons Worldwide has no effect on the direction of Wah Hong i.e., Wah Hong and Tycoons Worldwide go up and down completely randomly.

Pair Corralation between Wah Hong and Tycoons Worldwide

Assuming the 90 days trading horizon Wah Hong Industrial is expected to generate 1.5 times more return on investment than Tycoons Worldwide. However, Wah Hong is 1.5 times more volatile than Tycoons Worldwide Group. It trades about 0.06 of its potential returns per unit of risk. Tycoons Worldwide Group is currently generating about -0.04 per unit of risk. If you would invest  3,570  in Wah Hong Industrial on September 23, 2024 and sell it today you would earn a total of  700.00  from holding Wah Hong Industrial or generate 19.61% return on investment over 90 days.

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

Wah Hong Industrial  vs.  Tycoons Worldwide Group

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.

Tycoons Worldwide

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tycoons Worldwide Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tycoons Worldwide is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wah Hong and Tycoons Worldwide

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

The idea behind Wah Hong Industrial and Tycoons Worldwide Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.