Correlation Between Shandong Polymer and KSEC Intelligent

Can any of the company-specific risk be diversified away by investing in both Shandong Polymer and KSEC Intelligent 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 Shandong Polymer and KSEC Intelligent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shandong Polymer Biochemicals and KSEC Intelligent Technology, you can compare the effects of market volatilities on Shandong Polymer and KSEC Intelligent 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 Shandong Polymer with a short position of KSEC Intelligent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shandong Polymer and KSEC Intelligent.

Diversification Opportunities for Shandong Polymer and KSEC Intelligent

0.79

Correlation Coefficient

Shandong Polymer  KSEC Intelligent

Poor diversification

The 3 months correlation between Shandong and KSEC is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Shandong Polymer Biochemicals and KSEC Intelligent Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSEC Intelligent Tec and Shandong Polymer 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 Shandong Polymer Biochemicals are associated (or correlated) with KSEC Intelligent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSEC Intelligent Tec has no effect on the direction of Shandong Polymer i.e., Shandong Polymer and KSEC Intelligent go up and down completely randomly.

Pair Corralation between Shandong Polymer and KSEC Intelligent

Assuming the 90 days trading horizon Shandong Polymer Biochemicals is expected to generate 0.87 times more return on investment than KSEC Intelligent. However, Shandong Polymer Biochemicals is 1.15 times less risky than KSEC Intelligent. It trades about 0.11 of its potential returns per unit of risk. KSEC Intelligent Technology is currently generating about 0.07 per unit of risk. If you would invest  412.00  in Shandong Polymer Biochemicals on December 25, 2024 and sell it today you would earn a total of  44.00  from holding Shandong Polymer Biochemicals or generate 10.68% return on investment over 90 days.

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

Shandong Polymer Biochemicals  vs.  KSEC Intelligent Technology

Shandong Polymer Bio

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Polymer Biochemicals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Polymer may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KSEC Intelligent Tec

Risk-Adjusted Performance

Modest

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

Pair Trading with Shandong Polymer and KSEC Intelligent

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

The idea behind Shandong Polymer Biochemicals and KSEC Intelligent 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..