Correlation Between Tong Tai and Kinik

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

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

Diversification Opportunities for Tong Tai and Kinik

0.22

Correlation Coefficient

Tong Tai  Kinik

Modest diversification

The 3 months correlation between Tong and Kinik is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Tong Tai Machine Tool and Kinik Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinik and Tong 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 Tong Tai Machine Tool are associated (or correlated) with Kinik. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinik has no effect on the direction of Tong Tai i.e., Tong Tai and Kinik go up and down completely randomly.

Pair Corralation between Tong Tai and Kinik

Assuming the 90 days trading horizon Tong Tai Machine Tool is expected to under-perform the Kinik. In addition to that, Tong Tai is 1.13 times more volatile than Kinik Co. It trades about -0.11 of its total potential returns per unit of risk. Kinik Co is currently generating about -0.12 per unit of volatility. If you would invest  32,050  in Kinik Co on September 12, 2024 and sell it today you would lose (2,000) from holding Kinik Co or give up 6.24% of portfolio value over 90 days.

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

Tong Tai Machine Tool  vs.  Kinik Co

Tong Tai Machine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tong Tai Machine Tool 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.

Kinik

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinik Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kinik 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 Tong Tai and Kinik

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

The idea behind Tong Tai Machine Tool and Kinik Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.