Correlation Between Chien Kuo and Gold Rain

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

By analyzing existing cross correlation between Chien Kuo Construction and Gold Rain Enterprises, you can compare the effects of market volatilities on Chien Kuo and Gold Rain 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 Chien Kuo with a short position of Gold Rain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Kuo and Gold Rain.

Diversification Opportunities for Chien Kuo and Gold Rain

0.14

Correlation Coefficient

Chien Kuo  Gold Rain

Average diversification

The 3 months correlation between Chien and Gold is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and Gold Rain Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Rain Enterprises and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with Gold Rain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Rain Enterprises has no effect on the direction of Chien Kuo i.e., Chien Kuo and Gold Rain go up and down completely randomly.

Pair Corralation between Chien Kuo and Gold Rain

Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.75 times more return on investment than Gold Rain. However, Chien Kuo Construction is 1.33 times less risky than Gold Rain. It trades about 0.09 of its potential returns per unit of risk. Gold Rain Enterprises is currently generating about 0.04 per unit of risk. If you would invest  1,125  in Chien Kuo Construction on September 21, 2024 and sell it today you would earn a total of  1,555  from holding Chien Kuo Construction or generate 138.22% return on investment over 90 days.

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

Chien Kuo Construction  vs.  Gold Rain Enterprises

Chien Kuo Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Gold Rain Enterprises

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Rain Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Gold Rain 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 Chien Kuo and Gold Rain

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

The idea behind Chien Kuo Construction and Gold Rain Enterprises 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.