Correlation Between Kuang Chi and Changsha Jingjia

Can any of the company-specific risk be diversified away by investing in both Kuang Chi and Changsha Jingjia 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 Changsha Jingjia 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 Changsha Jingjia Microelectronics, you can compare the effects of market volatilities on Kuang Chi and Changsha Jingjia 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 Changsha Jingjia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuang Chi and Changsha Jingjia.

Diversification Opportunities for Kuang Chi and Changsha Jingjia

0.87

Correlation Coefficient

Kuang Chi  Changsha Jingjia

Very poor diversification

The 3 months correlation between Kuang and Changsha is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Changsha Jingjia Microelectron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Changsha Jingjia Mic 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 Changsha Jingjia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Changsha Jingjia Mic has no effect on the direction of Kuang Chi i.e., Kuang Chi and Changsha Jingjia go up and down completely randomly.

Pair Corralation between Kuang Chi and Changsha Jingjia

Assuming the 90 days trading horizon Kuang Chi is expected to generate 2.61 times less return on investment than Changsha Jingjia. But when comparing it to its historical volatility, Kuang Chi Technologies is 1.88 times less risky than Changsha Jingjia. It trades about 0.2 of its potential returns per unit of risk. Changsha Jingjia Microelectronics is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  8,225  in Changsha Jingjia Microelectronics on September 26, 2024 and sell it today you would earn a total of  2,310  from holding Changsha Jingjia Microelectronics or generate 28.09% return on investment over 90 days.

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

Kuang Chi Technologies  vs.  Changsha Jingjia Microelectron

Kuang Chi Technologies

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 21 (%) 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.

Changsha Jingjia Mic

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Changsha Jingjia Microelectronics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Changsha Jingjia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuang Chi and Changsha Jingjia

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

The idea behind Kuang Chi Technologies and Changsha Jingjia Microelectronics 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.