Correlation Between Golden Sun and Wah Fu

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

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

Diversification Opportunities for Golden Sun and Wah Fu

0.63

Correlation Coefficient

Golden Sun  Wah Fu

Poor diversification

The 3 months correlation between Golden and Wah is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Golden Sun Education and Wah Fu Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Fu Education and Golden Sun 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 Golden Sun Education are associated (or correlated) with Wah Fu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Fu Education has no effect on the direction of Golden Sun i.e., Golden Sun and Wah Fu go up and down completely randomly.

Pair Corralation between Golden Sun and Wah Fu

Given the investment horizon of 90 days Golden Sun is expected to generate 1.16 times less return on investment than Wah Fu. But when comparing it to its historical volatility, Golden Sun Education is 1.6 times less risky than Wah Fu. It trades about 0.05 of its potential returns per unit of risk. Wah Fu Education is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  173.00  in Wah Fu Education on December 27, 2024 and sell it today you would lose (2.00) from holding Wah Fu Education or give up 1.16% of portfolio value over 90 days.

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

Golden Sun Education  vs.  Wah Fu Education

Golden Sun Education

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golden Sun Education are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Golden Sun displayed solid returns over the last few months and may actually be approaching a breakup point.

Wah Fu Education

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Fu Education are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Wah Fu unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Golden Sun and Wah Fu

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

The idea behind Golden Sun Education and Wah Fu Education 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.