Correlation Between Kobay Tech and Dufu Tech

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

By analyzing existing cross correlation between Kobay Tech Bhd and Dufu Tech Corp, you can compare the effects of market volatilities on Kobay Tech and Dufu Tech 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 Kobay Tech with a short position of Dufu Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kobay Tech and Dufu Tech.

Diversification Opportunities for Kobay Tech and Dufu Tech

0.91

Correlation Coefficient

Kobay Tech  Dufu Tech

Almost no diversification

The 3 months correlation between Kobay and Dufu is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Kobay Tech Bhd and Dufu Tech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dufu Tech Corp and Kobay Tech 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 Kobay Tech Bhd are associated (or correlated) with Dufu Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dufu Tech Corp has no effect on the direction of Kobay Tech i.e., Kobay Tech and Dufu Tech go up and down completely randomly.

Pair Corralation between Kobay Tech and Dufu Tech

Assuming the 90 days trading horizon Kobay Tech Bhd is expected to generate 1.67 times more return on investment than Dufu Tech. However, Kobay Tech is 1.67 times more volatile than Dufu Tech Corp. It trades about 0.04 of its potential returns per unit of risk. Dufu Tech Corp is currently generating about 0.02 per unit of risk. If you would invest  144.00  in Kobay Tech Bhd on September 12, 2024 and sell it today you would earn a total of  8.00  from holding Kobay Tech Bhd or generate 5.56% return on investment over 90 days.

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

Kobay Tech Bhd  vs.  Dufu Tech Corp

Kobay Tech Bhd

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kobay Tech Bhd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kobay Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dufu Tech Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dufu Tech Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Dufu Tech is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kobay Tech and Dufu Tech

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

The idea behind Kobay Tech Bhd and Dufu Tech Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.