Correlation Between Wan Hai and Leader Electronics
Can any of the company-specific risk be diversified away by investing in both Wan Hai and Leader Electronics 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 Leader Electronics 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 Leader Electronics, you can compare the effects of market volatilities on Wan Hai and Leader Electronics 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 Leader Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Leader Electronics.
Diversification Opportunities for Wan Hai and Leader Electronics
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Wan and Leader is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Leader Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leader Electronics 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 Leader Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leader Electronics has no effect on the direction of Wan Hai i.e., Wan Hai and Leader Electronics go up and down completely randomly.
Pair Corralation between Wan Hai and Leader Electronics
Assuming the 90 days trading horizon Wan Hai Lines is expected to under-perform the Leader Electronics. In addition to that, Wan Hai is 1.28 times more volatile than Leader Electronics. It trades about -0.2 of its total potential returns per unit of risk. Leader Electronics is currently generating about -0.13 per unit of volatility. If you would invest 1,720 in Leader Electronics on September 13, 2024 and sell it today you would lose (85.00) from holding Leader Electronics or give up 4.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wan Hai Lines vs. Leader Electronics
Performance |
| Timeline |
| Wan Hai Lines |
| Leader Electronics |
Wan Hai and Leader Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Leader Electronics
The main advantage of trading using opposite Wan Hai and Leader Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, Leader Electronics 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 Leader Electronics will offset losses from the drop in Leader Electronics' 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 |
| Leader Electronics vs. Yang Ming Marine | Leader Electronics vs. Wan Hai Lines | Leader Electronics vs. U Ming Marine Transport | Leader Electronics 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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