Correlation Between Century Wind and Kuo Toong

Can any of the company-specific risk be diversified away by investing in both Century Wind and Kuo Toong 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 Century Wind and Kuo Toong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Century Wind Power and Kuo Toong International, you can compare the effects of market volatilities on Century Wind and Kuo Toong 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 Century Wind with a short position of Kuo Toong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Wind and Kuo Toong.

Diversification Opportunities for Century Wind and Kuo Toong

0.82

Correlation Coefficient

Century Wind  Kuo Toong

Very poor diversification

The 3 months correlation between Century and Kuo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Century Wind Power and Kuo Toong International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Toong International and Century Wind 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 Century Wind Power are associated (or correlated) with Kuo Toong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Toong International has no effect on the direction of Century Wind i.e., Century Wind and Kuo Toong go up and down completely randomly.

Pair Corralation between Century Wind and Kuo Toong

Assuming the 90 days trading horizon Century Wind Power is expected to generate 0.53 times more return on investment than Kuo Toong. However, Century Wind Power is 1.9 times less risky than Kuo Toong. It trades about -0.15 of its potential returns per unit of risk. Kuo Toong International is currently generating about -0.12 per unit of risk. If you would invest  33,500  in Century Wind Power on September 12, 2024 and sell it today you would lose (3,500) from holding Century Wind Power or give up 10.45% of portfolio value over 90 days.

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

Century Wind Power  vs.  Kuo Toong International

Century Wind Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Wind Power 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.

Kuo Toong International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuo Toong International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Century Wind and Kuo Toong

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

The idea behind Century Wind Power and Kuo Toong International 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.