Correlation Between Forest Water and Wan Hai
Can any of the company-specific risk be diversified away by investing in both Forest Water and Wan Hai 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 Forest Water and Wan Hai into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forest Water Environmental and Wan Hai Lines, you can compare the effects of market volatilities on Forest Water and Wan Hai 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 Forest Water with a short position of Wan Hai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forest Water and Wan Hai.
Diversification Opportunities for Forest Water and Wan Hai
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Forest and Wan is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Forest Water Environmental and Wan Hai Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wan Hai Lines and Forest Water 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 Forest Water Environmental are associated (or correlated) with Wan Hai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wan Hai Lines has no effect on the direction of Forest Water i.e., Forest Water and Wan Hai go up and down completely randomly.
Pair Corralation between Forest Water and Wan Hai
Assuming the 90 days trading horizon Forest Water is expected to generate 4.79 times less return on investment than Wan Hai. But when comparing it to its historical volatility, Forest Water Environmental is 1.3 times less risky than Wan Hai. It trades about 0.14 of its potential returns per unit of risk. Wan Hai Lines is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 7,150 in Wan Hai Lines on December 6, 2024 and sell it today you would earn a total of 1,480 from holding Wan Hai Lines or generate 20.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forest Water Environmental vs. Wan Hai Lines
Performance |
| Timeline |
| Forest Water Environ |
| Wan Hai Lines |
Forest Water and Wan Hai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forest Water and Wan Hai
The main advantage of trading using opposite Forest Water and Wan Hai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forest Water position performs unexpectedly, Wan Hai 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 Wan Hai will offset losses from the drop in Wan Hai's long position.| Forest Water vs. Cleanaway Co | Forest Water vs. Sunny Friend Environmental | Forest Water vs. Taiwan Secom Co | Forest Water vs. Taiwan Shin Kong |
| Wan Hai vs. Yang Ming Marine | Wan Hai vs. Evergreen Marine Corp | Wan Hai vs. Eva Airways Corp | Wan Hai vs. China Airlines |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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