Correlation Between Wei Chuan and Ma Kuang
Can any of the company-specific risk be diversified away by investing in both Wei Chuan and Ma Kuang 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 Wei Chuan and Ma Kuang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wei Chuan Foods and Ma Kuang Healthcare, you can compare the effects of market volatilities on Wei Chuan and Ma Kuang 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 Wei Chuan with a short position of Ma Kuang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wei Chuan and Ma Kuang.
Diversification Opportunities for Wei Chuan and Ma Kuang
Good diversification
The 3 months correlation between Wei and 4139 is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Wei Chuan Foods and Ma Kuang Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ma Kuang Healthcare and Wei Chuan 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 Wei Chuan Foods are associated (or correlated) with Ma Kuang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ma Kuang Healthcare has no effect on the direction of Wei Chuan i.e., Wei Chuan and Ma Kuang go up and down completely randomly.
Pair Corralation between Wei Chuan and Ma Kuang
Assuming the 90 days trading horizon Wei Chuan Foods is expected to generate 0.31 times more return on investment than Ma Kuang. However, Wei Chuan Foods is 3.24 times less risky than Ma Kuang. It trades about -0.02 of its potential returns per unit of risk. Ma Kuang Healthcare is currently generating about -0.02 per unit of risk. If you would invest 1,900 in Wei Chuan Foods on October 13, 2024 and sell it today you would lose (145.00) from holding Wei Chuan Foods or give up 7.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wei Chuan Foods vs. Ma Kuang Healthcare
Performance |
| Timeline |
| Wei Chuan Foods |
| Ma Kuang Healthcare |
Wei Chuan and Ma Kuang Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wei Chuan and Ma Kuang
The main advantage of trading using opposite Wei Chuan and Ma Kuang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wei Chuan position performs unexpectedly, Ma Kuang 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 Ma Kuang will offset losses from the drop in Ma Kuang's long position.| Wei Chuan vs. Uni President Enterprises Corp | Wei Chuan vs. Taisun Enterprise Co | Wei Chuan vs. AGV Products Corp | Wei Chuan vs. Great Wall Enterprise |
| Ma Kuang vs. International CSRC Investment | Ma Kuang vs. Hunya Foods Co | Ma Kuang vs. Wei Chuan Foods | Ma Kuang vs. Tai Tung Communication |
Check out your portfolio center.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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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