Correlation Between Top Union and Kingstate Electronics

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

By analyzing existing cross correlation between Top Union Electronics and Kingstate Electronics, you can compare the effects of market volatilities on Top Union and Kingstate Electronics 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 Top Union with a short position of Kingstate Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Top Union and Kingstate Electronics.

Diversification Opportunities for Top Union and Kingstate Electronics

-0.79

Correlation Coefficient

Top Union  Kingstate Electronics

Pay attention - limited upside

The 3 months correlation between Top and Kingstate is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Top Union Electronics and Kingstate Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingstate Electronics and Top Union 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 Top Union Electronics are associated (or correlated) with Kingstate Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingstate Electronics has no effect on the direction of Top Union i.e., Top Union and Kingstate Electronics go up and down completely randomly.

Pair Corralation between Top Union and Kingstate Electronics

Assuming the 90 days trading horizon Top Union Electronics is expected to generate 0.9 times more return on investment than Kingstate Electronics. However, Top Union Electronics is 1.11 times less risky than Kingstate Electronics. It trades about 0.1 of its potential returns per unit of risk. Kingstate Electronics is currently generating about -0.17 per unit of risk. If you would invest  3,185  in Top Union Electronics on September 13, 2024 and sell it today you would earn a total of  215.00  from holding Top Union Electronics or generate 6.75% return on investment over 90 days.

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

Top Union Electronics  vs.  Kingstate Electronics

Top Union Electronics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Top Union Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Top Union may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kingstate Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingstate Electronics 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 Top Union and Kingstate Electronics

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

The idea behind Top Union Electronics and Kingstate Electronics 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.