Correlation Between WHA Industrial and CPR Gomu

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

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

Diversification Opportunities for WHA Industrial and CPR Gomu

0.4

Correlation Coefficient

WHA Industrial  CPR Gomu

Very weak diversification

The 3 months correlation between WHA and CPR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding WHA Industrial Leasehold and CPR Gomu Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPR Gomu Industrial and WHA Industrial 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 Industrial Leasehold are associated (or correlated) with CPR Gomu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPR Gomu Industrial has no effect on the direction of WHA Industrial i.e., WHA Industrial and CPR Gomu go up and down completely randomly.

Pair Corralation between WHA Industrial and CPR Gomu

Assuming the 90 days trading horizon WHA Industrial is expected to generate 1.68 times less return on investment than CPR Gomu. But when comparing it to its historical volatility, WHA Industrial Leasehold is 3.48 times less risky than CPR Gomu. It trades about 0.23 of its potential returns per unit of risk. CPR Gomu Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  284.00  in CPR Gomu Industrial on September 3, 2024 and sell it today you would earn a total of  74.00  from holding CPR Gomu Industrial or generate 26.06% return on investment over 90 days.

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

WHA Industrial Leasehold  vs.  CPR Gomu Industrial

WHA Industrial Leasehold

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WHA Industrial Leasehold are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, WHA Industrial sustained solid returns over the last few months and may actually be approaching a breakup point.

CPR Gomu Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPR Gomu Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, CPR Gomu disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WHA Industrial and CPR Gomu

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

The idea behind WHA Industrial Leasehold and CPR Gomu Industrial 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.