Correlation Between WHA Premium and CPN Retail

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

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

Diversification Opportunities for WHA Premium and CPN Retail

0.61

Correlation Coefficient

WHA Premium  CPN Retail

Poor diversification

The 3 months correlation between WHA and CPN is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding WHA Premium Growth and CPN Retail Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPN Retail Growth and WHA Premium 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 Premium Growth are associated (or correlated) with CPN Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPN Retail Growth has no effect on the direction of WHA Premium i.e., WHA Premium and CPN Retail go up and down completely randomly.

Pair Corralation between WHA Premium and CPN Retail

Assuming the 90 days trading horizon WHA Premium Growth is expected to under-perform the CPN Retail. But the stock apears to be less risky and, when comparing its historical volatility, WHA Premium Growth is 1.61 times less risky than CPN Retail. The stock trades about -0.01 of its potential returns per unit of risk. The CPN Retail Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,119  in CPN Retail Growth on September 3, 2024 and sell it today you would earn a total of  101.00  from holding CPN Retail Growth or generate 9.03% return on investment over 90 days.

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

WHA Premium Growth  vs.  CPN Retail Growth

WHA Premium Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WHA Premium Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, WHA Premium is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CPN Retail Growth

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CPN Retail Growth are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CPN Retail may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WHA Premium and CPN Retail

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

The idea behind WHA Premium Growth and CPN Retail Growth 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.