Correlation Between WHA Utilities and Carabao Group
Can any of the company-specific risk be diversified away by investing in both WHA Utilities and Carabao Group 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 Utilities and Carabao Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WHA Utilities and and Carabao Group Public, you can compare the effects of market volatilities on WHA Utilities and Carabao Group 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 Utilities with a short position of Carabao Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of WHA Utilities and Carabao Group.
Diversification Opportunities for WHA Utilities and Carabao Group
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between WHA and Carabao is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WHA Utilities and and Carabao Group Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carabao Group Public and WHA Utilities 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 Utilities and are associated (or correlated) with Carabao Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carabao Group Public has no effect on the direction of WHA Utilities i.e., WHA Utilities and Carabao Group go up and down completely randomly.
Pair Corralation between WHA Utilities and Carabao Group
Assuming the 90 days trading horizon WHA Utilities and is expected to under-perform the Carabao Group. But the stock apears to be less risky and, when comparing its historical volatility, WHA Utilities and is 1.61 times less risky than Carabao Group. The stock trades about -0.38 of its potential returns per unit of risk. The Carabao Group Public is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 6,375 in Carabao Group Public on January 20, 2024 and sell it today you would lose (200.00) from holding Carabao Group Public or give up 3.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WHA Utilities and vs. Carabao Group Public
Performance |
| Timeline |
| WHA Utilities |
| Carabao Group Public |
WHA Utilities and Carabao Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WHA Utilities and Carabao Group
The main advantage of trading using opposite WHA Utilities and Carabao Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WHA Utilities position performs unexpectedly, Carabao Group 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 Carabao Group will offset losses from the drop in Carabao Group's long position.The idea behind WHA Utilities and and Carabao Group Public pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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