Correlation Between Arbor Technology and Kwong Fong

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

By analyzing existing cross correlation between Arbor Technology and Kwong Fong Industries, you can compare the effects of market volatilities on Arbor Technology and Kwong Fong 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 Arbor Technology with a short position of Kwong Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arbor Technology and Kwong Fong.

Diversification Opportunities for Arbor Technology and Kwong Fong

-0.06

Correlation Coefficient

Arbor Technology  Kwong Fong

Good diversification

The 3 months correlation between Arbor and Kwong is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Technology and Kwong Fong Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwong Fong Industries and Arbor 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 Arbor Technology are associated (or correlated) with Kwong Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwong Fong Industries has no effect on the direction of Arbor Technology i.e., Arbor Technology and Kwong Fong go up and down completely randomly.

Pair Corralation between Arbor Technology and Kwong Fong

Assuming the 90 days trading horizon Arbor Technology is expected to generate 1.66 times more return on investment than Kwong Fong. However, Arbor Technology is 1.66 times more volatile than Kwong Fong Industries. It trades about 0.05 of its potential returns per unit of risk. Kwong Fong Industries is currently generating about 0.03 per unit of risk. If you would invest  2,980  in Arbor Technology on September 4, 2024 and sell it today you would earn a total of  1,780  from holding Arbor Technology or generate 59.73% return on investment over 90 days.

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

Arbor Technology  vs.  Kwong Fong Industries

Arbor Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arbor Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Arbor Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Kwong Fong Industries

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kwong Fong Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kwong Fong 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 Arbor Technology and Kwong Fong

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

The idea behind Arbor Technology and Kwong Fong Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.