Correlation Between Wah Lee and Huaku Development
Can any of the company-specific risk be diversified away by investing in both Wah Lee and Huaku Development 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 Huaku Development 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 Huaku Development Co, you can compare the effects of market volatilities on Wah Lee and Huaku Development 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 Huaku Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Lee and Huaku Development.
Diversification Opportunities for Wah Lee and Huaku Development
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wah and Huaku is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wah Lee Industrial and Huaku Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huaku Development 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 Huaku Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huaku Development has no effect on the direction of Wah Lee i.e., Wah Lee and Huaku Development go up and down completely randomly.
Pair Corralation between Wah Lee and Huaku Development
Assuming the 90 days trading horizon Wah Lee is expected to generate 11.31 times less return on investment than Huaku Development. But when comparing it to its historical volatility, Wah Lee Industrial is 1.16 times less risky than Huaku Development. It trades about 0.01 of its potential returns per unit of risk. Huaku Development Co is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 11,850 in Huaku Development Co on August 29, 2024 and sell it today you would earn a total of 450.00 from holding Huaku Development Co or generate 3.8% 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. Huaku Development Co
Performance |
| Timeline |
| Wah Lee Industrial |
| Huaku Development |
Wah Lee and Huaku Development Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Lee and Huaku Development
The main advantage of trading using opposite Wah Lee and Huaku Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Lee position performs unexpectedly, Huaku Development 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 Huaku Development will offset losses from the drop in Huaku Development's 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 |
| Huaku Development vs. Chong Hong Construction | Huaku Development vs. Highwealth Construction Corp | Huaku Development vs. Fubon Financial Holding | Huaku Development vs. CTBC Financial Holding |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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