Correlation Between Long Bon and Kindom Construction

Can any of the company-specific risk be diversified away by investing in both Long Bon and Kindom Construction 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 Long Bon and Kindom Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Long Bon International and Kindom Construction Corp, you can compare the effects of market volatilities on Long Bon and Kindom Construction 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 Long Bon with a short position of Kindom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Long Bon and Kindom Construction.

Diversification Opportunities for Long Bon and Kindom Construction

-0.32

Correlation Coefficient

Long Bon  Kindom Construction

Very good diversification

The 3 months correlation between Long and Kindom is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Long Bon International and Kindom Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindom Construction Corp and Long Bon 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 Long Bon International are associated (or correlated) with Kindom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindom Construction Corp has no effect on the direction of Long Bon i.e., Long Bon and Kindom Construction go up and down completely randomly.

Pair Corralation between Long Bon and Kindom Construction

Assuming the 90 days trading horizon Long Bon International is expected to under-perform the Kindom Construction. But the stock apears to be less risky and, when comparing its historical volatility, Long Bon International is 1.55 times less risky than Kindom Construction. The stock trades about -0.01 of its potential returns per unit of risk. The Kindom Construction Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,860  in Kindom Construction Corp on September 28, 2024 and sell it today you would earn a total of  320.00  from holding Kindom Construction Corp or generate 6.58% return on investment over 90 days.

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

Long Bon International  vs.  Kindom Construction Corp

Long Bon International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kindom Construction Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kindom Construction Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kindom Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Long Bon and Kindom Construction

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

The idea behind Long Bon International and Kindom Construction Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.