Correlation Between Test Research and Wah Lee
Can any of the company-specific risk be diversified away by investing in both Test Research and Wah Lee 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 Test Research and Wah Lee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Test Research and Wah Lee Industrial, you can compare the effects of market volatilities on Test Research and Wah Lee 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 Test Research with a short position of Wah Lee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Test Research and Wah Lee.
Diversification Opportunities for Test Research and Wah Lee
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Test and Wah is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Test Research and Wah Lee Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Lee Industrial and Test Research 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 Test Research are associated (or correlated) with Wah Lee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Lee Industrial has no effect on the direction of Test Research i.e., Test Research and Wah Lee go up and down completely randomly.
Pair Corralation between Test Research and Wah Lee
Assuming the 90 days trading horizon Test Research is expected to generate 1.85 times more return on investment than Wah Lee. However, Test Research is 1.85 times more volatile than Wah Lee Industrial. It trades about 0.02 of its potential returns per unit of risk. Wah Lee Industrial is currently generating about 0.01 per unit of risk. If you would invest 13,650 in Test Research on August 29, 2024 and sell it today you would earn a total of 50.00 from holding Test Research or generate 0.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Test Research vs. Wah Lee Industrial
Performance |
| Timeline |
| Test Research |
| Wah Lee Industrial |
Test Research and Wah Lee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Test Research and Wah Lee
The main advantage of trading using opposite Test Research and Wah Lee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Test Research position performs unexpectedly, Wah Lee 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 Wah Lee will offset losses from the drop in Wah Lee's long position.| Test Research vs. Novatek Microelectronics Corp | Test Research vs. Sitronix Technology Corp | Test Research vs. Elan Microelectronics Corp | Test Research vs. Global Unichip Corp |
| Wah Lee vs. Huaku Development Co | Wah Lee vs. Topco Scientific Co | Wah Lee vs. Test Research | Wah Lee vs. Shinkong Insurance 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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