Correlation Between Whirlpool and Hisense Home

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

By analyzing existing cross correlation between Whirlpool and Hisense Home Appliances, you can compare the effects of market volatilities on Whirlpool and Hisense Home 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 Whirlpool with a short position of Hisense Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Whirlpool and Hisense Home.

Diversification Opportunities for Whirlpool and Hisense Home

0.34

Correlation Coefficient

Whirlpool  Hisense Home

Weak diversification

The 3 months correlation between Whirlpool and Hisense is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Whirlpool and Hisense Home Appliances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hisense Home Appliances and Whirlpool 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 Whirlpool are associated (or correlated) with Hisense Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hisense Home Appliances has no effect on the direction of Whirlpool i.e., Whirlpool and Hisense Home go up and down completely randomly.

Pair Corralation between Whirlpool and Hisense Home

Assuming the 90 days horizon Whirlpool is expected to generate 16.5 times less return on investment than Hisense Home. But when comparing it to its historical volatility, Whirlpool is 1.88 times less risky than Hisense Home. It trades about 0.01 of its potential returns per unit of risk. Hisense Home Appliances is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Hisense Home Appliances on October 21, 2024 and sell it today you would earn a total of  272.00  from holding Hisense Home Appliances or generate 418.46% return on investment over 90 days.

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

Whirlpool  vs.  Hisense Home Appliances

Whirlpool

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Whirlpool are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Whirlpool reported solid returns over the last few months and may actually be approaching a breakup point.

Hisense Home Appliances

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hisense Home reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Whirlpool and Hisense Home

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

The idea behind Whirlpool and Hisense Home Appliances 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.