Correlation Between Kingwaytek Technology and Harmony Electronics

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

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

Diversification Opportunities for Kingwaytek Technology and Harmony Electronics

0.67

Correlation Coefficient

Kingwaytek Technology  Harmony Electronics

Poor diversification

The 3 months correlation between Kingwaytek and Harmony is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Kingwaytek Technology Co and Harmony Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harmony Electronics and Kingwaytek Technology 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 Kingwaytek Technology Co are associated (or correlated) with Harmony Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harmony Electronics has no effect on the direction of Kingwaytek Technology i.e., Kingwaytek Technology and Harmony Electronics go up and down completely randomly.

Pair Corralation between Kingwaytek Technology and Harmony Electronics

Assuming the 90 days trading horizon Kingwaytek Technology Co is expected to under-perform the Harmony Electronics. But the stock apears to be less risky and, when comparing its historical volatility, Kingwaytek Technology Co is 1.76 times less risky than Harmony Electronics. The stock trades about -0.09 of its potential returns per unit of risk. The Harmony Electronics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,515  in Harmony Electronics on September 12, 2024 and sell it today you would lose (120.00) from holding Harmony Electronics or give up 3.41% of portfolio value over 90 days.

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

Kingwaytek Technology Co  vs.  Harmony Electronics

Kingwaytek Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kingwaytek Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kingwaytek Technology is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Harmony Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harmony Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Harmony Electronics 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 Kingwaytek Technology and Harmony Electronics

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

The idea behind Kingwaytek Technology Co and Harmony 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.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.