Correlation Between WHA Public and Union Petrochemical

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

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

Diversification Opportunities for WHA Public and Union Petrochemical

0.04

Correlation Coefficient

WHA Public  Union Petrochemical

Significant diversification

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

Pair Corralation between WHA Public and Union Petrochemical

Assuming the 90 days trading horizon WHA Public is expected to under-perform the Union Petrochemical. But the stock apears to be less risky and, when comparing its historical volatility, WHA Public is 2.48 times less risky than Union Petrochemical. The stock trades about -0.17 of its potential returns per unit of risk. The Union Petrochemical Public is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Union Petrochemical Public on December 26, 2024 and sell it today you would lose (6.00) from holding Union Petrochemical Public or give up 10.34% 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.  Union Petrochemical Public

WHA Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days WHA Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Union Petrochemical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Petrochemical Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward-looking signals, Union Petrochemical may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with WHA Public and Union Petrochemical

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

The idea behind WHA Public and Union Petrochemical 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.