Correlation Between Wah Lee and Greatek Electronics
Can any of the company-specific risk be diversified away by investing in both Wah Lee and Greatek 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 Wah Lee and Greatek Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Lee Industrial and Greatek Electronics, you can compare the effects of market volatilities on Wah Lee and Greatek 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 Wah Lee with a short position of Greatek Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and Greatek Electronics.
Diversification Opportunities for Wah Lee and Greatek Electronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wah and Greatek is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Greatek Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greatek Electronics and Wah Lee 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 Wah Lee Industrial are associated (or correlated) with Greatek Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greatek Electronics has no effect on the direction of Wah Lee i.e., Wah Lee and Greatek Electronics go up and down completely randomly.
Pair Corralation between Wah Lee and Greatek Electronics
Assuming the 90 days trading horizon Wah Lee Industrial is expected to generate 1.62 times more return on investment than Greatek Electronics. However, Wah Lee is 1.62 times more volatile than Greatek Electronics. It trades about 0.01 of its potential returns per unit of risk. Greatek Electronics is currently generating about -0.08 per unit of risk. If you would invest 12,400 in Wah Lee Industrial on August 29, 2024 and sell it today you would earn a total of 0.00 from holding Wah Lee Industrial or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wah Lee Industrial vs. Greatek Electronics
Performance |
| Timeline |
| Wah Lee Industrial |
| Greatek Electronics |
Wah Lee and Greatek Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Lee and Greatek Electronics
The main advantage of trading using opposite Wah Lee and Greatek Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Lee position performs unexpectedly, Greatek 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 Greatek Electronics will offset losses from the drop in Greatek Electronics' long position.| Wah Lee vs. Huaku Development Co | Wah Lee vs. Topco Scientific Co | Wah Lee vs. Test Research | Wah Lee vs. Shinkong Insurance Co |
| Greatek Electronics vs. Novatek Microelectronics Corp | Greatek Electronics vs. Sitronix Technology Corp | Greatek Electronics vs. Elan Microelectronics Corp | Greatek Electronics vs. Global Unichip Corp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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