Correlation Between Hongrun Construction and Kuang Chi

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

By analyzing existing cross correlation between Hongrun Construction Group and Kuang Chi Technologies, you can compare the effects of market volatilities on Hongrun Construction and Kuang Chi 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 Hongrun Construction with a short position of Kuang Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongrun Construction and Kuang Chi.

Diversification Opportunities for Hongrun Construction and Kuang Chi

-0.16

Correlation Coefficient

Hongrun Construction  Kuang Chi

Good diversification

The 3 months correlation between Hongrun and Kuang is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hongrun Construction Group and Kuang Chi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuang Chi Technologies and Hongrun Construction 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 Hongrun Construction Group are associated (or correlated) with Kuang Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuang Chi Technologies has no effect on the direction of Hongrun Construction i.e., Hongrun Construction and Kuang Chi go up and down completely randomly.

Pair Corralation between Hongrun Construction and Kuang Chi

Assuming the 90 days trading horizon Hongrun Construction Group is expected to generate 0.77 times more return on investment than Kuang Chi. However, Hongrun Construction Group is 1.29 times less risky than Kuang Chi. It trades about 0.07 of its potential returns per unit of risk. Kuang Chi Technologies is currently generating about -0.07 per unit of risk. If you would invest  461.00  in Hongrun Construction Group on December 26, 2024 and sell it today you would earn a total of  39.00  from holding Hongrun Construction Group or generate 8.46% return on investment over 90 days.

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

Hongrun Construction Group  vs.  Kuang Chi Technologies

Hongrun Construction

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hongrun Construction Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hongrun Construction may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Kuang Chi Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kuang Chi Technologies 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hongrun Construction and Kuang Chi

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

The idea behind Hongrun Construction Group and Kuang Chi Technologies 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.