Correlation Between Kasten and China Health

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

By analyzing existing cross correlation between Kasten Inc and China Health Management, you can compare the effects of market volatilities on Kasten and China Health 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 Kasten with a short position of China Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kasten and China Health.

Diversification Opportunities for Kasten and China Health

0.62

Correlation Coefficient

Kasten  China Health

Poor diversification

The 3 months correlation between Kasten and China is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kasten Inc and China Health Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Management and Kasten 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 Kasten Inc are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Management has no effect on the direction of Kasten i.e., Kasten and China Health go up and down completely randomly.

Pair Corralation between Kasten and China Health

Given the investment horizon of 90 days Kasten Inc is expected to generate 3.01 times more return on investment than China Health. However, Kasten is 3.01 times more volatile than China Health Management. It trades about 0.1 of its potential returns per unit of risk. China Health Management is currently generating about 0.03 per unit of risk. If you would invest  0.49  in Kasten Inc on September 29, 2024 and sell it today you would earn a total of  0.11  from holding Kasten Inc or generate 22.45% return on investment over 90 days.

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

Kasten Inc  vs.  China Health Management

Kasten Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kasten Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kasten unveiled solid returns over the last few months and may actually be approaching a breakup point.

China Health Management

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Health Management are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent technical indicators, China Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Kasten and China Health

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

The idea behind Kasten Inc and China Health Management 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.