Correlation Between Kuangda Technology and DO Home

Can any of the company-specific risk be diversified away by investing in both Kuangda Technology and DO Home 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 DO Home 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 DO Home Collection, you can compare the effects of market volatilities on Kuangda Technology and DO Home 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 DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuangda Technology and DO Home.

Diversification Opportunities for Kuangda Technology and DO Home

0.76

Correlation Coefficient

Kuangda Technology  DO Home

Poor diversification

The 3 months correlation between Kuangda and 002798 is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection 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 DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and DO Home go up and down completely randomly.

Pair Corralation between Kuangda Technology and DO Home

Assuming the 90 days trading horizon Kuangda Technology Group is expected to generate 0.91 times more return on investment than DO Home. However, Kuangda Technology Group is 1.1 times less risky than DO Home. It trades about 0.05 of its potential returns per unit of risk. DO Home Collection is currently generating about 0.02 per unit of risk. If you would invest  445.00  in Kuangda Technology Group on October 11, 2024 and sell it today you would earn a total of  39.00  from holding Kuangda Technology Group or generate 8.76% return on investment over 90 days.

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

Kuangda Technology Group  vs.  DO Home Collection

Kuangda Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuangda Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DO Home Collection

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DO Home Collection are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DO Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kuangda Technology and DO Home

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

The idea behind Kuangda Technology Group and DO Home Collection 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.