Correlation Between Kingfa Science and HMT

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

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

Diversification Opportunities for Kingfa Science and HMT

0.62

Correlation Coefficient

Kingfa Science  HMT

Poor diversification

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

Pair Corralation between Kingfa Science and HMT

Assuming the 90 days trading horizon Kingfa Science Technology is expected to generate 1.06 times more return on investment than HMT. However, Kingfa Science is 1.06 times more volatile than HMT Limited. It trades about 0.35 of its potential returns per unit of risk. HMT Limited is currently generating about 0.07 per unit of risk. If you would invest  286,120  in Kingfa Science Technology on September 23, 2024 and sell it today you would earn a total of  55,820  from holding Kingfa Science Technology or generate 19.51% return on investment over 90 days.

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

Kingfa Science Technology  vs.  HMT Limited

Kingfa Science Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kingfa Science and HMT

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

The idea behind Kingfa Science Technology and HMT Limited 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.