Correlation Between LK Engineering and Kuo Toong

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

By analyzing existing cross correlation between LK Engineering Co and Kuo Toong International, you can compare the effects of market volatilities on LK Engineering and Kuo Toong 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 LK Engineering with a short position of Kuo Toong. Check out your portfolio center. Please also check ongoing floating volatility patterns of LK Engineering and Kuo Toong.

Diversification Opportunities for LK Engineering and Kuo Toong

-0.33

Correlation Coefficient

LK Engineering  Kuo Toong

Very good diversification

The 3 months correlation between 6139 and Kuo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding LK Engineering Co and Kuo Toong International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuo Toong International and LK Engineering 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 LK Engineering Co are associated (or correlated) with Kuo Toong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuo Toong International has no effect on the direction of LK Engineering i.e., LK Engineering and Kuo Toong go up and down completely randomly.

Pair Corralation between LK Engineering and Kuo Toong

Assuming the 90 days trading horizon LK Engineering Co is expected to generate 1.19 times more return on investment than Kuo Toong. However, LK Engineering is 1.19 times more volatile than Kuo Toong International. It trades about 0.09 of its potential returns per unit of risk. Kuo Toong International is currently generating about -0.12 per unit of risk. If you would invest  20,150  in LK Engineering Co on September 12, 2024 and sell it today you would earn a total of  2,750  from holding LK Engineering Co or generate 13.65% return on investment over 90 days.

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

LK Engineering Co  vs.  Kuo Toong International

LK Engineering

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LK Engineering Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, LK Engineering showed solid returns over the last few months and may actually be approaching a breakup point.

Kuo Toong International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuo Toong International 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.

Pair Trading with LK Engineering and Kuo Toong

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

The idea behind LK Engineering Co and Kuo Toong International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.