Correlation Between Kuangda Technology and Shenzhen Silver

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

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

Diversification Opportunities for Kuangda Technology and Shenzhen Silver

0.68

Correlation Coefficient

Kuangda Technology  Shenzhen Silver

Poor diversification

The 3 months correlation between Kuangda and Shenzhen is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Shenzhen Silver Basis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Silver Basis and Kuangda Technology 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 Kuangda Technology Group are associated (or correlated) with Shenzhen Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Silver Basis has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Shenzhen Silver go up and down completely randomly.

Pair Corralation between Kuangda Technology and Shenzhen Silver

Assuming the 90 days trading horizon Kuangda Technology Group is expected to generate 0.89 times more return on investment than Shenzhen Silver. However, Kuangda Technology Group is 1.13 times less risky than Shenzhen Silver. It trades about 0.15 of its potential returns per unit of risk. Shenzhen Silver Basis is currently generating about 0.07 per unit of risk. If you would invest  391.00  in Kuangda Technology Group on September 25, 2024 and sell it today you would earn a total of  146.00  from holding Kuangda Technology Group or generate 37.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Kuangda Technology Group  vs.  Shenzhen Silver Basis

Kuangda Technology

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuangda Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Shenzhen Silver Basis

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Silver Basis are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shenzhen Silver sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuangda Technology and Shenzhen Silver

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

The idea behind Kuangda Technology Group and Shenzhen Silver Basis 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..