Correlation Between CPN Commercial and WHA Premium

Can any of the company-specific risk be diversified away by investing in both CPN Commercial and WHA Premium 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 CPN Commercial and WHA Premium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CPN Commercial Growth and WHA Premium Growth, you can compare the effects of market volatilities on CPN Commercial and WHA Premium 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 CPN Commercial with a short position of WHA Premium. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPN Commercial and WHA Premium.

Diversification Opportunities for CPN Commercial and WHA Premium

-0.37

Correlation Coefficient

CPN Commercial  WHA Premium

Very good diversification

The 3 months correlation between CPN and WHA is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding CPN Commercial Growth and WHA Premium Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WHA Premium Growth and CPN Commercial 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 CPN Commercial Growth are associated (or correlated) with WHA Premium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WHA Premium Growth has no effect on the direction of CPN Commercial i.e., CPN Commercial and WHA Premium go up and down completely randomly.

Pair Corralation between CPN Commercial and WHA Premium

Assuming the 90 days trading horizon CPN Commercial Growth is expected to under-perform the WHA Premium. But the stock apears to be less risky and, when comparing its historical volatility, CPN Commercial Growth is 1.15 times less risky than WHA Premium. The stock trades about -0.06 of its potential returns per unit of risk. The WHA Premium Growth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,006  in WHA Premium Growth on December 29, 2024 and sell it today you would earn a total of  14.00  from holding WHA Premium Growth or generate 1.39% return on investment over 90 days.

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

CPN Commercial Growth  vs.  WHA Premium Growth

CPN Commercial Growth

Risk-Adjusted Performance

Very Weak

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

WHA Premium Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WHA Premium Growth are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, WHA Premium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CPN Commercial and WHA Premium

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

The idea behind CPN Commercial Growth and WHA Premium Growth 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.