Correlation Between Kwong Fong and Tong Tai

Can any of the company-specific risk be diversified away by investing in both Kwong Fong and Tong Tai 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 Kwong Fong and Tong Tai into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kwong Fong Industries and Tong Tai Machine Tool, you can compare the effects of market volatilities on Kwong Fong and Tong Tai 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 Kwong Fong with a short position of Tong Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kwong Fong and Tong Tai.

Diversification Opportunities for Kwong Fong and Tong Tai

-0.24

Correlation Coefficient

Kwong Fong  Tong Tai

Very good diversification

The 3 months correlation between Kwong and Tong is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Tong Tai Machine Tool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Tai Machine and Kwong Fong 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 Kwong Fong Industries are associated (or correlated) with Tong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Tai Machine has no effect on the direction of Kwong Fong i.e., Kwong Fong and Tong Tai go up and down completely randomly.

Pair Corralation between Kwong Fong and Tong Tai

Assuming the 90 days trading horizon Kwong Fong Industries is expected to generate 0.54 times more return on investment than Tong Tai. However, Kwong Fong Industries is 1.86 times less risky than Tong Tai. It trades about 0.07 of its potential returns per unit of risk. Tong Tai Machine Tool is currently generating about -0.04 per unit of risk. If you would invest  1,255  in Kwong Fong Industries on September 11, 2024 and sell it today you would earn a total of  85.00  from holding Kwong Fong Industries or generate 6.77% return on investment over 90 days.

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

Kwong Fong Industries  vs.  Tong Tai Machine Tool

Kwong Fong Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kwong Fong Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Kwong Fong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Kwong Fong and Tong Tai

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

The idea behind Kwong Fong Industries and Tong Tai Machine Tool 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..