Correlation Between Thye Ming and Wha Yu

Can any of the company-specific risk be diversified away by investing in both Thye Ming and Wha Yu 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 Thye Ming and Wha Yu into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Thye Ming and Wha Yu

-0.19

Correlation Coefficient

Thye Ming  Wha Yu

Good diversification

The 3 months correlation between Thye and Wha is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Thye Ming Industrial and Wha Yu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wha Yu Industrial and Thye Ming 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 Thye Ming Industrial are associated (or correlated) with Wha Yu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wha Yu Industrial has no effect on the direction of Thye Ming i.e., Thye Ming and Wha Yu go up and down completely randomly.

Pair Corralation between Thye Ming and Wha Yu

Assuming the 90 days trading horizon Thye Ming Industrial is expected to generate 0.37 times more return on investment than Wha Yu. However, Thye Ming Industrial is 2.74 times less risky than Wha Yu. It trades about 0.18 of its potential returns per unit of risk. Wha Yu Industrial is currently generating about -0.05 per unit of risk. If you would invest  6,400  in Thye Ming Industrial on October 26, 2024 and sell it today you would earn a total of  210.00  from holding Thye Ming Industrial or generate 3.28% return on investment over 90 days.

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

Thye Ming Industrial  vs.  Wha Yu Industrial

Thye Ming Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wha Yu Industrial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wha Yu Industrial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Wha Yu 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 Thye Ming and Wha Yu

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

The idea behind Thye Ming Industrial and Wha Yu 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.