Correlation Between Nan Liu and KNH Enterprise

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

By analyzing existing cross correlation between Nan Liu Enterprise and KNH Enterprise Co, you can compare the effects of market volatilities on Nan Liu and KNH Enterprise 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 Nan Liu with a short position of KNH Enterprise. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Liu and KNH Enterprise.

Diversification Opportunities for Nan Liu and KNH Enterprise

0.88

Correlation Coefficient

Nan Liu  KNH Enterprise

Very poor diversification

The 3 months correlation between Nan and KNH is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Nan Liu Enterprise and KNH Enterprise Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNH Enterprise and Nan Liu 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 Nan Liu Enterprise are associated (or correlated) with KNH Enterprise. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNH Enterprise has no effect on the direction of Nan Liu i.e., Nan Liu and KNH Enterprise go up and down completely randomly.

Pair Corralation between Nan Liu and KNH Enterprise

Assuming the 90 days trading horizon Nan Liu Enterprise is expected to generate 0.86 times more return on investment than KNH Enterprise. However, Nan Liu Enterprise is 1.17 times less risky than KNH Enterprise. It trades about -0.17 of its potential returns per unit of risk. KNH Enterprise Co is currently generating about -0.16 per unit of risk. If you would invest  7,060  in Nan Liu Enterprise on September 24, 2024 and sell it today you would lose (730.00) from holding Nan Liu Enterprise or give up 10.34% of portfolio value over 90 days.

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

Nan Liu Enterprise  vs.  KNH Enterprise Co

Nan Liu Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nan Liu Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

KNH Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KNH Enterprise Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Nan Liu and KNH Enterprise

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

The idea behind Nan Liu Enterprise and KNH Enterprise Co 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.