Correlation Between Industrial and Kuangda Technology

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

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

Diversification Opportunities for Industrial and Kuangda Technology

0.33

Correlation Coefficient

Industrial  Kuangda Technology

Weak diversification

The 3 months correlation between Industrial and Kuangda is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Industrial and Commercial and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Industrial 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 Industrial and Commercial are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Industrial i.e., Industrial and Kuangda Technology go up and down completely randomly.

Pair Corralation between Industrial and Kuangda Technology

Assuming the 90 days trading horizon Industrial is expected to generate 3.78 times less return on investment than Kuangda Technology. But when comparing it to its historical volatility, Industrial and Commercial is 2.29 times less risky than Kuangda Technology. It trades about 0.12 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  372.00  in Kuangda Technology Group on September 5, 2024 and sell it today you would earn a total of  165.00  from holding Kuangda Technology Group or generate 44.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Industrial and Commercial  vs.  Kuangda Technology Group

Industrial and Commercial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Industrial and Commercial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kuangda Technology

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuangda Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industrial and Kuangda Technology

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

The idea behind Industrial and Commercial and Kuangda Technology Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.