Correlation Between Kang Yong and BANPU POWER

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

By analyzing existing cross correlation between Kang Yong Electric and BANPU POWER, you can compare the effects of market volatilities on Kang Yong and BANPU POWER 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 Kang Yong with a short position of BANPU POWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kang Yong and BANPU POWER.

Diversification Opportunities for Kang Yong and BANPU POWER

0.68

Correlation Coefficient

Kang Yong  BANPU POWER

Poor diversification

The 3 months correlation between Kang and BANPU is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kang Yong Electric and BANPU POWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANPU POWER and Kang Yong 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 Kang Yong Electric are associated (or correlated) with BANPU POWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANPU POWER has no effect on the direction of Kang Yong i.e., Kang Yong and BANPU POWER go up and down completely randomly.

Pair Corralation between Kang Yong and BANPU POWER

Assuming the 90 days trading horizon Kang Yong Electric is expected to generate 0.16 times more return on investment than BANPU POWER. However, Kang Yong Electric is 6.36 times less risky than BANPU POWER. It trades about -0.08 of its potential returns per unit of risk. BANPU POWER is currently generating about -0.15 per unit of risk. If you would invest  29,000  in Kang Yong Electric on September 24, 2024 and sell it today you would lose (600.00) from holding Kang Yong Electric or give up 2.07% of portfolio value over 90 days.

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

Kang Yong Electric  vs.  BANPU POWER

Kang Yong Electric

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kang Yong Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Kang Yong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

BANPU POWER

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANPU POWER has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat 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 Kang Yong and BANPU POWER

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

The idea behind Kang Yong Electric and BANPU POWER 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.