Correlation Between American Woodmark and Man Wah

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

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

Diversification Opportunities for American Woodmark and Man Wah

-0.57

Correlation Coefficient

American Woodmark  Man Wah

Excellent diversification

The 3 months correlation between American and Man is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Woodmark and Man Wah Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Man Wah Holdings and American Woodmark 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 American Woodmark are associated (or correlated) with Man Wah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Man Wah Holdings has no effect on the direction of American Woodmark i.e., American Woodmark and Man Wah go up and down completely randomly.

Pair Corralation between American Woodmark and Man Wah

Assuming the 90 days horizon American Woodmark is expected to under-perform the Man Wah. But the stock apears to be less risky and, when comparing its historical volatility, American Woodmark is 2.61 times less risky than Man Wah. The stock trades about -0.11 of its potential returns per unit of risk. The Man Wah Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Man Wah Holdings on September 27, 2024 and sell it today you would earn a total of  6.00  from holding Man Wah Holdings or generate 12.0% return on investment over 90 days.

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

American Woodmark  vs.  Man Wah Holdings

American Woodmark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Woodmark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Woodmark is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Man Wah Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Man Wah Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Man Wah reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with American Woodmark and Man Wah

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

The idea behind American Woodmark and Man Wah Holdings 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.