Correlation Between WHA Public and TAC Consumer

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

By analyzing existing cross correlation between WHA Public and TAC Consumer Public, you can compare the effects of market volatilities on WHA Public and TAC Consumer 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 TAC Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of WHA Public and TAC Consumer.

Diversification Opportunities for WHA Public and TAC Consumer

0.04

Correlation Coefficient

WHA Public  TAC Consumer

Significant diversification

The 3 months correlation between WHA and TAC is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding WHA Public and TAC Consumer Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAC Consumer Public 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 TAC Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAC Consumer Public has no effect on the direction of WHA Public i.e., WHA Public and TAC Consumer go up and down completely randomly.

Pair Corralation between WHA Public and TAC Consumer

Assuming the 90 days trading horizon WHA Public is expected to under-perform the TAC Consumer. In addition to that, WHA Public is 1.81 times more volatile than TAC Consumer Public. It trades about -0.41 of its total potential returns per unit of risk. TAC Consumer Public is currently generating about -0.2 per unit of volatility. If you would invest  470.00  in TAC Consumer Public on September 23, 2024 and sell it today you would lose (16.00) from holding TAC Consumer Public or give up 3.4% of portfolio value over 90 days.

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

WHA Public  vs.  TAC Consumer Public

WHA Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WHA Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WHA Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

TAC Consumer Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TAC Consumer Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with WHA Public and TAC Consumer

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

The idea behind WHA Public and TAC Consumer Public 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..