Correlation Between Huaku Development and Kee Tai

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

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

Diversification Opportunities for Huaku Development and Kee Tai

0.92

Correlation Coefficient

Huaku Development  Kee Tai

Almost no diversification

The 3 months correlation between Huaku and Kee is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Huaku Development Co and Kee Tai Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kee Tai Properties and Huaku Development 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 Huaku Development Co are associated (or correlated) with Kee Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kee Tai Properties has no effect on the direction of Huaku Development i.e., Huaku Development and Kee Tai go up and down completely randomly.

Pair Corralation between Huaku Development and Kee Tai

Assuming the 90 days trading horizon Huaku Development Co is expected to under-perform the Kee Tai. In addition to that, Huaku Development is 1.43 times more volatile than Kee Tai Properties. It trades about -0.14 of its total potential returns per unit of risk. Kee Tai Properties is currently generating about -0.14 per unit of volatility. If you would invest  1,805  in Kee Tai Properties on September 4, 2024 and sell it today you would lose (200.00) from holding Kee Tai Properties or give up 11.08% of portfolio value over 90 days.

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

Huaku Development Co  vs.  Kee Tai Properties

Huaku Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huaku Development Co 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.

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 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 Huaku Development and Kee Tai

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

The idea behind Huaku Development Co and Kee Tai Properties 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.