Correlation Between Kuang Chi and Blue Sail

Can any of the company-specific risk be diversified away by investing in both Kuang Chi and Blue Sail 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 Kuang Chi and Blue Sail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kuang Chi Technologies and Blue Sail Medical, you can compare the effects of market volatilities on Kuang Chi and Blue Sail 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 Kuang Chi with a short position of Blue Sail. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuang Chi and Blue Sail.

Diversification Opportunities for Kuang Chi and Blue Sail

0.74

Correlation Coefficient

Kuang Chi  Blue Sail

Poor diversification

The 3 months correlation between Kuang and Blue is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Blue Sail Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Sail Medical and Kuang Chi 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 Kuang Chi Technologies are associated (or correlated) with Blue Sail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Sail Medical has no effect on the direction of Kuang Chi i.e., Kuang Chi and Blue Sail go up and down completely randomly.

Pair Corralation between Kuang Chi and Blue Sail

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 2.12 times more return on investment than Blue Sail. However, Kuang Chi is 2.12 times more volatile than Blue Sail Medical. It trades about 0.26 of its potential returns per unit of risk. Blue Sail Medical is currently generating about 0.01 per unit of risk. If you would invest  2,478  in Kuang Chi Technologies on September 29, 2024 and sell it today you would earn a total of  2,327  from holding Kuang Chi Technologies or generate 93.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Kuang Chi Technologies  vs.  Blue Sail Medical

Kuang Chi Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi sustained solid returns over the last few months and may actually be approaching a breakup point.

Blue Sail Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Sail Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blue Sail is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kuang Chi and Blue Sail

The main advantage of trading using opposite Kuang Chi and Blue Sail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kuang Chi position performs unexpectedly, Blue Sail 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 Blue Sail will offset losses from the drop in Blue Sail's long position.

The idea behind Kuang Chi Technologies and Blue Sail Medical 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.