Correlation Between Kingsignal Technology and Wuxi Chemical

Can any of the company-specific risk be diversified away by investing in both Kingsignal Technology and Wuxi Chemical 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 Kingsignal Technology and Wuxi Chemical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kingsignal Technology Co and Wuxi Chemical Equipment, you can compare the effects of market volatilities on Kingsignal Technology and Wuxi Chemical 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 Kingsignal Technology with a short position of Wuxi Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kingsignal Technology and Wuxi Chemical.

Diversification Opportunities for Kingsignal Technology and Wuxi Chemical

0.88

Correlation Coefficient

Kingsignal Technology  Wuxi Chemical

Very poor diversification

The 3 months correlation between Kingsignal and Wuxi is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kingsignal Technology Co and Wuxi Chemical Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wuxi Chemical Equipment and Kingsignal Technology 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 Kingsignal Technology Co are associated (or correlated) with Wuxi Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wuxi Chemical Equipment has no effect on the direction of Kingsignal Technology i.e., Kingsignal Technology and Wuxi Chemical go up and down completely randomly.

Pair Corralation between Kingsignal Technology and Wuxi Chemical

Assuming the 90 days trading horizon Kingsignal Technology Co is expected to generate 1.7 times more return on investment than Wuxi Chemical. However, Kingsignal Technology is 1.7 times more volatile than Wuxi Chemical Equipment. It trades about 0.17 of its potential returns per unit of risk. Wuxi Chemical Equipment is currently generating about 0.21 per unit of risk. If you would invest  653.00  in Kingsignal Technology Co on September 13, 2024 and sell it today you would earn a total of  337.00  from holding Kingsignal Technology Co or generate 51.61% return on investment over 90 days.

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

Kingsignal Technology Co  vs.  Wuxi Chemical Equipment

Kingsignal Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingsignal Technology Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kingsignal Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Wuxi Chemical Equipment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kingsignal Technology and Wuxi Chemical

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

The idea behind Kingsignal Technology Co and Wuxi Chemical Equipment 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.