Correlation Between Chow Tai and Kering SA

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

By analyzing existing cross correlation between Chow Tai Fook and Kering SA, you can compare the effects of market volatilities on Chow Tai and Kering SA 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 Chow Tai with a short position of Kering SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chow Tai and Kering SA.

Diversification Opportunities for Chow Tai and Kering SA

-0.02

Correlation Coefficient

Chow Tai  Kering SA

Good diversification

The 3 months correlation between Chow and Kering is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chow Tai Fook and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA and Chow Tai 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 Chow Tai Fook are associated (or correlated) with Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Chow Tai i.e., Chow Tai and Kering SA go up and down completely randomly.

Pair Corralation between Chow Tai and Kering SA

Assuming the 90 days horizon Chow Tai Fook is expected to generate 1.12 times more return on investment than Kering SA. However, Chow Tai is 1.12 times more volatile than Kering SA. It trades about 0.04 of its potential returns per unit of risk. Kering SA is currently generating about -0.08 per unit of risk. If you would invest  819.00  in Chow Tai Fook on September 3, 2024 and sell it today you would earn a total of  47.00  from holding Chow Tai Fook or generate 5.74% return on investment over 90 days.

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

Chow Tai Fook  vs.  Kering SA

Chow Tai Fook

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chow Tai Fook are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chow Tai may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kering SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kering SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chow Tai and Kering SA

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

The idea behind Chow Tai Fook and Kering SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.