Correlation Between Wan Hai and Champion Building
Can any of the company-specific risk be diversified away by investing in both Wan Hai and Champion Building 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 Wan Hai and Champion Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wan Hai Lines and Champion Building Materials, you can compare the effects of market volatilities on Wan Hai and Champion Building 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 Wan Hai with a short position of Champion Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Champion Building.
Diversification Opportunities for Wan Hai and Champion Building
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wan and Champion is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Champion Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Building and Wan Hai 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 Wan Hai Lines are associated (or correlated) with Champion Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Building has no effect on the direction of Wan Hai i.e., Wan Hai and Champion Building go up and down completely randomly.
Pair Corralation between Wan Hai and Champion Building
Assuming the 90 days trading horizon Wan Hai Lines is expected to under-perform the Champion Building. In addition to that, Wan Hai is 1.35 times more volatile than Champion Building Materials. It trades about -0.22 of its total potential returns per unit of risk. Champion Building Materials is currently generating about 0.2 per unit of volatility. If you would invest 1,010 in Champion Building Materials on September 12, 2024 and sell it today you would earn a total of 75.00 from holding Champion Building Materials or generate 7.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Wan Hai Lines vs. Champion Building Materials
Performance |
| Timeline |
| Wan Hai Lines |
| Champion Building |
Wan Hai and Champion Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Champion Building
The main advantage of trading using opposite Wan Hai and Champion Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, Champion Building 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 Champion Building will offset losses from the drop in Champion Building's long position.| Wan Hai vs. Yang Ming Marine | Wan Hai vs. U Ming Marine Transport | Wan Hai vs. Taiwan Navigation Co | Wan Hai vs. China Airlines |
| Champion Building vs. Yang Ming Marine | Champion Building vs. Wan Hai Lines | Champion Building vs. U Ming Marine Transport | Champion Building vs. Taiwan Navigation Co |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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