Correlation Between Hunan Mendale and Kuangda Technology

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

By analyzing existing cross correlation between Hunan Mendale Hometextile and Kuangda Technology Group, you can compare the effects of market volatilities on Hunan Mendale and Kuangda 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 Hunan Mendale with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hunan Mendale and Kuangda Technology.

Diversification Opportunities for Hunan Mendale and Kuangda Technology

0.23

Correlation Coefficient

Hunan Mendale  Kuangda Technology

Modest diversification

The 3 months correlation between Hunan and Kuangda is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hunan Mendale Hometextile and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Hunan Mendale 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 Hunan Mendale Hometextile are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Hunan Mendale i.e., Hunan Mendale and Kuangda Technology go up and down completely randomly.

Pair Corralation between Hunan Mendale and Kuangda Technology

Assuming the 90 days trading horizon Hunan Mendale Hometextile is expected to generate 2.35 times more return on investment than Kuangda Technology. However, Hunan Mendale is 2.35 times more volatile than Kuangda Technology Group. It trades about 0.17 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.01 per unit of risk. If you would invest  276.00  in Hunan Mendale Hometextile on December 24, 2024 and sell it today you would earn a total of  136.00  from holding Hunan Mendale Hometextile or generate 49.28% return on investment over 90 days.

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

Hunan Mendale Hometextile  vs.  Kuangda Technology Group

Hunan Mendale Hometextile

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Mendale Hometextile are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Mendale sustained solid returns over the last few months and may actually be approaching a breakup point.

Kuangda Technology

Risk-Adjusted Performance

Weak

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

Pair Trading with Hunan Mendale and Kuangda Technology

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

The idea behind Hunan Mendale Hometextile and Kuangda Technology Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.