Correlation Between Kwong Fong and Jinli Group

Can any of the company-specific risk be diversified away by investing in both Kwong Fong and Jinli 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 Kwong Fong and Jinli Group 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 Jinli Group Holdings, you can compare the effects of market volatilities on Kwong Fong and Jinli 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 Kwong Fong with a short position of Jinli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kwong Fong and Jinli Group.

Diversification Opportunities for Kwong Fong and Jinli Group

0.54

Correlation Coefficient

Kwong Fong  Jinli Group

Very weak diversification

The 3 months correlation between Kwong and Jinli is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Jinli Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jinli Group Holdings 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 Jinli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jinli Group Holdings has no effect on the direction of Kwong Fong i.e., Kwong Fong and Jinli Group go up and down completely randomly.

Pair Corralation between Kwong Fong and Jinli Group

Assuming the 90 days trading horizon Kwong Fong is expected to generate 116.12 times less return on investment than Jinli Group. But when comparing it to its historical volatility, Kwong Fong Industries is 1.68 times less risky than Jinli Group. It trades about 0.0 of its potential returns per unit of risk. Jinli Group Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Jinli Group Holdings on September 1, 2024 and sell it today you would earn a total of  310.00  from holding Jinli Group Holdings or generate 31.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Kwong Fong Industries  vs.  Jinli Group Holdings

Kwong Fong Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kwong Fong Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kwong Fong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Jinli Group Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jinli Group Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Jinli Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kwong Fong and Jinli Group

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

The idea behind Kwong Fong Industries and Jinli Group Holdings 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.