Correlation Between Wha Yu and ABC Taiwan
Can any of the company-specific risk be diversified away by investing in both Wha Yu and ABC Taiwan 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 Wha Yu and ABC Taiwan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wha Yu Industrial and ABC Taiwan Electronics, you can compare the effects of market volatilities on Wha Yu and ABC Taiwan 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 Wha Yu with a short position of ABC Taiwan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wha Yu and ABC Taiwan.
Diversification Opportunities for Wha Yu and ABC Taiwan
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wha and ABC is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Wha Yu Industrial and ABC Taiwan Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABC Taiwan Electronics and Wha Yu 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 Wha Yu Industrial are associated (or correlated) with ABC Taiwan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABC Taiwan Electronics has no effect on the direction of Wha Yu i.e., Wha Yu and ABC Taiwan go up and down completely randomly.
Pair Corralation between Wha Yu and ABC Taiwan
Assuming the 90 days trading horizon Wha Yu Industrial is expected to generate 2.57 times more return on investment than ABC Taiwan. However, Wha Yu is 2.57 times more volatile than ABC Taiwan Electronics. It trades about 0.23 of its potential returns per unit of risk. ABC Taiwan Electronics is currently generating about 0.17 per unit of risk. If you would invest 1,645 in Wha Yu Industrial on September 5, 2024 and sell it today you would earn a total of 275.00 from holding Wha Yu Industrial or generate 16.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wha Yu Industrial vs. ABC Taiwan Electronics
Performance |
| Timeline |
| Wha Yu Industrial |
| ABC Taiwan Electronics |
Wha Yu and ABC Taiwan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wha Yu and ABC Taiwan
The main advantage of trading using opposite Wha Yu and ABC Taiwan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wha Yu position performs unexpectedly, ABC Taiwan 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 ABC Taiwan will offset losses from the drop in ABC Taiwan's long position.| Wha Yu vs. Gemtek Technology Co | Wha Yu vs. Arcadyan Technology Corp | Wha Yu vs. Zinwell | Wha Yu vs. Silitech Technology Corp |
| ABC Taiwan vs. Wha Yu Industrial | ABC Taiwan vs. Shan Loong Transportation Co | ABC Taiwan vs. Ton Yi Industrial | ABC Taiwan vs. Chinese Maritime Transport |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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