Correlation Between Kee Tai and Ruentex Engineering

Can any of the company-specific risk be diversified away by investing in both Kee Tai and Ruentex Engineering 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 Kee Tai and Ruentex Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kee Tai Properties and Ruentex Engineering Construction, you can compare the effects of market volatilities on Kee Tai and Ruentex Engineering 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 Kee Tai with a short position of Ruentex Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kee Tai and Ruentex Engineering.

Diversification Opportunities for Kee Tai and Ruentex Engineering

0.74

Correlation Coefficient

Kee Tai  Ruentex Engineering

Poor diversification

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

Pair Corralation between Kee Tai and Ruentex Engineering

Assuming the 90 days trading horizon Kee Tai Properties is expected to under-perform the Ruentex Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Kee Tai Properties is 1.11 times less risky than Ruentex Engineering. The stock trades about -0.2 of its potential returns per unit of risk. The Ruentex Engineering Construction is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  15,050  in Ruentex Engineering Construction on August 31, 2024 and sell it today you would lose (700.00) from holding Ruentex Engineering Construction or give up 4.65% of portfolio value over 90 days.

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

Kee Tai Properties  vs.  Ruentex Engineering Constructi

Kee Tai Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kee Tai Properties 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 December 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Ruentex Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kee Tai and Ruentex Engineering

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

The idea behind Kee Tai Properties and Ruentex Engineering Construction 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.