Correlation Between Hong Ho and Kingstate Electronics

Can any of the company-specific risk be diversified away by investing in both Hong Ho and Kingstate Electronics 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 Hong Ho and Kingstate Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Ho Precision and Kingstate Electronics, you can compare the effects of market volatilities on Hong Ho and Kingstate Electronics 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 Hong Ho with a short position of Kingstate Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Ho and Kingstate Electronics.

Diversification Opportunities for Hong Ho and Kingstate Electronics

-0.47

Correlation Coefficient

Hong Ho  Kingstate Electronics

Very good diversification

The 3 months correlation between Hong and Kingstate is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hong Ho Precision and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics and Hong Ho 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 Hong Ho Precision are associated (or correlated) with Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Hong Ho i.e., Hong Ho and Kingstate Electronics go up and down completely randomly.

Pair Corralation between Hong Ho and Kingstate Electronics

Assuming the 90 days trading horizon Hong Ho Precision is expected to generate 2.08 times more return on investment than Kingstate Electronics. However, Hong Ho is 2.08 times more volatile than Kingstate Electronics. It trades about 0.08 of its potential returns per unit of risk. Kingstate Electronics is currently generating about -0.15 per unit of risk. If you would invest  4,915  in Hong Ho Precision on September 2, 2024 and sell it today you would earn a total of  565.00  from holding Hong Ho Precision or generate 11.5% return on investment over 90 days.

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

Hong Ho Precision  vs.  Kingstate Electronics

Hong Ho Precision

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Ho Precision are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hong Ho showed solid returns over the last few months and may actually be approaching a breakup point.

Kingstate Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingstate Electronics 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 Hong Ho and Kingstate Electronics

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

The idea behind Hong Ho Precision and Kingstate Electronics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.