Correlation Between Sunfon Construction and KNH Enterprise

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

By analyzing existing cross correlation between Sunfon Construction Co and KNH Enterprise Co, you can compare the effects of market volatilities on Sunfon Construction and KNH Enterprise 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 Sunfon Construction with a short position of KNH Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunfon Construction and KNH Enterprise.

Diversification Opportunities for Sunfon Construction and KNH Enterprise

0.77

Correlation Coefficient

Sunfon Construction  KNH Enterprise

Poor diversification

The 3 months correlation between Sunfon and KNH is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sunfon Construction Co and KNH Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNH Enterprise and Sunfon Construction 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 Sunfon Construction Co are associated (or correlated) with KNH Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNH Enterprise has no effect on the direction of Sunfon Construction i.e., Sunfon Construction and KNH Enterprise go up and down completely randomly.

Pair Corralation between Sunfon Construction and KNH Enterprise

Assuming the 90 days trading horizon Sunfon Construction Co is expected to generate 1.11 times more return on investment than KNH Enterprise. However, Sunfon Construction is 1.11 times more volatile than KNH Enterprise Co. It trades about -0.12 of its potential returns per unit of risk. KNH Enterprise Co is currently generating about -0.18 per unit of risk. If you would invest  2,240  in Sunfon Construction Co on September 2, 2024 and sell it today you would lose (210.00) from holding Sunfon Construction Co or give up 9.37% of portfolio value over 90 days.

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

Sunfon Construction Co  vs.  KNH Enterprise Co

Sunfon Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunfon Construction Co 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.

KNH Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNH Enterprise Co 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 Sunfon Construction and KNH Enterprise

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

The idea behind Sunfon Construction Co and KNH Enterprise 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.