Correlation Between Eastern Communications and Kuang Chi

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

By analyzing existing cross correlation between Eastern Communications Co and Kuang Chi Technologies, you can compare the effects of market volatilities on Eastern Communications and Kuang Chi 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 Eastern Communications with a short position of Kuang Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern Communications and Kuang Chi.

Diversification Opportunities for Eastern Communications and Kuang Chi

0.93

Correlation Coefficient

Eastern Communications  Kuang Chi

Almost no diversification

The 3 months correlation between Eastern and Kuang is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Communications Co and Kuang Chi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuang Chi Technologies and Eastern Communications 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 Eastern Communications Co are associated (or correlated) with Kuang Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuang Chi Technologies has no effect on the direction of Eastern Communications i.e., Eastern Communications and Kuang Chi go up and down completely randomly.

Pair Corralation between Eastern Communications and Kuang Chi

Assuming the 90 days trading horizon Eastern Communications Co is expected to generate 0.58 times more return on investment than Kuang Chi. However, Eastern Communications Co is 1.72 times less risky than Kuang Chi. It trades about -0.04 of its potential returns per unit of risk. Kuang Chi Technologies is currently generating about -0.21 per unit of risk. If you would invest  44.00  in Eastern Communications Co on September 12, 2024 and sell it today you would lose (1.00) from holding Eastern Communications Co or give up 2.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Eastern Communications Co  vs.  Kuang Chi Technologies

Eastern Communications

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eastern Communications Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Eastern Communications sustained solid returns over the last few months and may actually be approaching a breakup point.

Kuang Chi Technologies

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eastern Communications and Kuang Chi

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

The idea behind Eastern Communications Co and Kuang Chi Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.