Correlation Between WHA Public and Power Solution

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

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

Diversification Opportunities for WHA Public and Power Solution

-0.05

Correlation Coefficient

WHA Public  Power Solution

Good diversification

The 3 months correlation between WHA and Power is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding WHA Public and Power Solution Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Solution Techn and WHA Public 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 WHA Public are associated (or correlated) with Power Solution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Solution Techn has no effect on the direction of WHA Public i.e., WHA Public and Power Solution go up and down completely randomly.

Pair Corralation between WHA Public and Power Solution

Assuming the 90 days trading horizon WHA Public is expected to generate 0.67 times more return on investment than Power Solution. However, WHA Public is 1.49 times less risky than Power Solution. It trades about 0.1 of its potential returns per unit of risk. Power Solution Technologies is currently generating about -0.08 per unit of risk. If you would invest  519.00  in WHA Public on September 4, 2024 and sell it today you would earn a total of  61.00  from holding WHA Public or generate 11.75% return on investment over 90 days.

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

WHA Public  vs.  Power Solution Technologies

WHA Public

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WHA Public are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, WHA Public may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Power Solution Techn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Solution Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with WHA Public and Power Solution

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

The idea behind WHA Public and Power Solution Technologies 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.