Correlation Between TCL Corp and Shenzhen Kaifa

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

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

Diversification Opportunities for TCL Corp and Shenzhen Kaifa

-0.02

Correlation Coefficient

TCL Corp  Shenzhen Kaifa

Good diversification

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

Pair Corralation between TCL Corp and Shenzhen Kaifa

Assuming the 90 days trading horizon TCL Corp is expected to under-perform the Shenzhen Kaifa. But the stock apears to be less risky and, when comparing its historical volatility, TCL Corp is 1.72 times less risky than Shenzhen Kaifa. The stock trades about -0.12 of its potential returns per unit of risk. The Shenzhen Kaifa Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,976  in Shenzhen Kaifa Technology on December 25, 2024 and sell it today you would lose (49.00) from holding Shenzhen Kaifa Technology or give up 2.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

TCL Corp  vs.  Shenzhen Kaifa Technology

TCL Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TCL Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Kaifa Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shenzhen Kaifa Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shenzhen Kaifa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TCL Corp and Shenzhen Kaifa

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

The idea behind TCL Corp and Shenzhen Kaifa Technology 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.