Correlation Between Chia Her and Kinpo Electronics

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

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

Diversification Opportunities for Chia Her and Kinpo Electronics

0.74

Correlation Coefficient

Chia Her  Kinpo Electronics

Poor diversification

The 3 months correlation between Chia and Kinpo is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Chia Her Industrial and Kinpo Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinpo Electronics and Chia Her 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 Chia Her Industrial are associated (or correlated) with Kinpo Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinpo Electronics has no effect on the direction of Chia Her i.e., Chia Her and Kinpo Electronics go up and down completely randomly.

Pair Corralation between Chia Her and Kinpo Electronics

Assuming the 90 days trading horizon Chia Her is expected to generate 1.25 times less return on investment than Kinpo Electronics. In addition to that, Chia Her is 1.0 times more volatile than Kinpo Electronics. It trades about 0.11 of its total potential returns per unit of risk. Kinpo Electronics is currently generating about 0.14 per unit of volatility. If you would invest  2,280  in Kinpo Electronics on September 3, 2024 and sell it today you would earn a total of  705.00  from holding Kinpo Electronics or generate 30.92% return on investment over 90 days.

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

Chia Her Industrial  vs.  Kinpo Electronics

Chia Her Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chia Her Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chia Her showed solid returns over the last few months and may actually be approaching a breakup point.

Kinpo Electronics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinpo Electronics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kinpo Electronics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chia Her and Kinpo Electronics

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

The idea behind Chia Her Industrial and Kinpo 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.

Check out your portfolio center.

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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .