Correlation Between Founding Construction and Kwong Fong

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

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

Diversification Opportunities for Founding Construction and Kwong Fong

-0.35

Correlation Coefficient

Founding Construction  Kwong Fong

Very good diversification

The 3 months correlation between Founding and Kwong is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Founding Construction Developm 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 Founding 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 Founding Construction Development 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 Founding Construction i.e., Founding Construction and Kwong Fong go up and down completely randomly.

Pair Corralation between Founding Construction and Kwong Fong

Assuming the 90 days trading horizon Founding Construction is expected to generate 3.24 times less return on investment than Kwong Fong. But when comparing it to its historical volatility, Founding Construction Development is 1.48 times less risky than Kwong Fong. It trades about 0.02 of its potential returns per unit of risk. Kwong Fong Industries is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,215  in Kwong Fong Industries on September 4, 2024 and sell it today you would earn a total of  55.00  from holding Kwong Fong Industries or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Founding Construction Developm  vs.  Kwong Fong Industries

Founding Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Founding Construction Development are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Founding Construction is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Founding Construction and Kwong Fong

The main advantage of trading using opposite Founding Construction and Kwong Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Founding Construction 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 Founding Construction Development 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.