Correlation Between Kuang Chi and Zhejiang Tailin

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

Diversification Opportunities for Kuang Chi and Zhejiang Tailin

0.56

Correlation Coefficient

Kuang Chi  Zhejiang Tailin

Very weak diversification

The 3 months correlation between Kuang and Zhejiang is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Zhejiang Tailin Bioengineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Tailin Bioe 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 Zhejiang Tailin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Tailin Bioe has no effect on the direction of Kuang Chi i.e., Kuang Chi and Zhejiang Tailin go up and down completely randomly.

Pair Corralation between Kuang Chi and Zhejiang Tailin

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 1.32 times more return on investment than Zhejiang Tailin. However, Kuang Chi is 1.32 times more volatile than Zhejiang Tailin Bioengineering. It trades about 0.26 of its potential returns per unit of risk. Zhejiang Tailin Bioengineering is currently generating about -0.05 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	Weak
Accuracy	100.0%
Values	Daily Returns

Kuang Chi Technologies  vs.  Zhejiang Tailin Bioengineering

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.

Zhejiang Tailin Bioe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zhejiang Tailin Bioengineering has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Kuang Chi and Zhejiang Tailin

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

The idea behind Kuang Chi Technologies and Zhejiang Tailin Bioengineering 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..