Correlation Between Wah Fu and Golden Sun

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

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

Diversification Opportunities for Wah Fu and Golden Sun

0.63

Correlation Coefficient

Wah Fu  Golden Sun

Poor diversification

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

Pair Corralation between Wah Fu and Golden Sun

Given the investment horizon of 90 days Wah Fu Education is expected to generate 1.6 times more return on investment than Golden Sun. However, Wah Fu is 1.6 times more volatile than Golden Sun Education. It trades about 0.03 of its potential returns per unit of risk. Golden Sun Education is currently generating about 0.05 per unit of risk. 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

Wah Fu Education  vs.  Golden Sun Education

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.

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.

Pair Trading with Wah Fu and Golden Sun

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

The idea behind Wah Fu Education and Golden Sun 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.