Correlation Between Wan Hai and Kao Fong
Can any of the company-specific risk be diversified away by investing in both Wan Hai and Kao Fong 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 Kao Fong 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 Kao Fong Machinery, you can compare the effects of market volatilities on Wan Hai and Kao Fong 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 Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wan Hai and Kao Fong.
Diversification Opportunities for Wan Hai and Kao Fong
Very good diversification
The 3 months correlation between Wan and Kao is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Wan Hai Lines and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery 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 Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Wan Hai i.e., Wan Hai and Kao Fong go up and down completely randomly.
Pair Corralation between Wan Hai and Kao Fong
Assuming the 90 days trading horizon Wan Hai is expected to generate 1.53 times less return on investment than Kao Fong. But when comparing it to its historical volatility, Wan Hai Lines is 1.21 times less risky than Kao Fong. It trades about 0.12 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,800 in Kao Fong Machinery on September 3, 2024 and sell it today you would earn a total of 2,985 from holding Kao Fong Machinery or generate 165.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wan Hai Lines vs. Kao Fong Machinery
Performance |
| Timeline |
| Wan Hai Lines |
| Kao Fong Machinery |
Wan Hai and Kao Fong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wan Hai and Kao Fong
The main advantage of trading using opposite Wan Hai and Kao Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wan Hai position performs unexpectedly, Kao Fong 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 Kao Fong will offset losses from the drop in Kao Fong's long position.| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
| Kao Fong vs. Airtac International Group | Kao Fong vs. TECO Electric Machinery | Kao Fong vs. Chung Hsin Electric Machinery | Kao Fong vs. Ruentex Development 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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