Correlation Between Ton Yi and Wah Hong

Can any of the company-specific risk be diversified away by investing in both Ton Yi and Wah Hong 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 Ton Yi and Wah Hong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ton Yi Industrial and Wah Hong Industrial, you can compare the effects of market volatilities on Ton Yi and Wah Hong 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 Ton Yi with a short position of Wah Hong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ton Yi and Wah Hong.

Diversification Opportunities for Ton Yi and Wah Hong

-0.43

Correlation Coefficient

Ton Yi  Wah Hong

Very good diversification

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

Pair Corralation between Ton Yi and Wah Hong

Assuming the 90 days trading horizon Ton Yi Industrial is expected to under-perform the Wah Hong. But the stock apears to be less risky and, when comparing its historical volatility, Ton Yi Industrial is 3.24 times less risky than Wah Hong. The stock trades about -0.06 of its potential returns per unit of risk. The Wah Hong Industrial is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,295  in Wah Hong Industrial on September 13, 2024 and sell it today you would earn a total of  1,235  from holding Wah Hong Industrial or generate 37.48% return on investment over 90 days.

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

Ton Yi Industrial  vs.  Wah Hong Industrial

Ton Yi Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wah Hong Industrial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Hong Industrial are ranked lower than 11 (%) 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.

Pair Trading with Ton Yi and Wah Hong

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

The idea behind Ton Yi Industrial and Wah Hong 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.

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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.