Correlation Between Wuxi Chemical and Kangyue Technology

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

By analyzing existing cross correlation between Wuxi Chemical Equipment and Kangyue Technology Co, you can compare the effects of market volatilities on Wuxi Chemical and Kangyue Technology 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 Wuxi Chemical with a short position of Kangyue Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wuxi Chemical and Kangyue Technology.

Diversification Opportunities for Wuxi Chemical and Kangyue Technology

0.24

Correlation Coefficient

Wuxi Chemical  Kangyue Technology

Modest diversification

The 3 months correlation between Wuxi and Kangyue is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Wuxi Chemical Equipment and Kangyue Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangyue Technology and Wuxi Chemical 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 Wuxi Chemical Equipment are associated (or correlated) with Kangyue Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangyue Technology has no effect on the direction of Wuxi Chemical i.e., Wuxi Chemical and Kangyue Technology go up and down completely randomly.

Pair Corralation between Wuxi Chemical and Kangyue Technology

Assuming the 90 days trading horizon Wuxi Chemical is expected to generate 1.34 times less return on investment than Kangyue Technology. But when comparing it to its historical volatility, Wuxi Chemical Equipment is 2.54 times less risky than Kangyue Technology. It trades about 0.14 of its potential returns per unit of risk. Kangyue Technology Co is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  368.00  in Kangyue Technology Co on October 24, 2024 and sell it today you would earn a total of  100.00  from holding Kangyue Technology Co or generate 27.17% return on investment over 90 days.

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

Wuxi Chemical Equipment  vs.  Kangyue Technology Co

Wuxi Chemical Equipment

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wuxi Chemical Equipment are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wuxi Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Kangyue Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kangyue Technology Co 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 basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Wuxi Chemical and Kangyue Technology

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

The idea behind Wuxi Chemical Equipment and Kangyue Technology Co 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .