Correlation Between Kuangda Technology and Jiujiang Shanshui

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

Diversification Opportunities for Kuangda Technology and Jiujiang Shanshui

0.85

Correlation Coefficient

Kuangda Technology  Jiujiang Shanshui

Very poor diversification

The 3 months correlation between Kuangda and Jiujiang is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Jiujiang Shanshui Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jiujiang Shanshui 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 Jiujiang Shanshui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jiujiang Shanshui has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Jiujiang Shanshui go up and down completely randomly.

Pair Corralation between Kuangda Technology and Jiujiang Shanshui

Assuming the 90 days trading horizon Kuangda Technology Group is expected to generate 2.06 times more return on investment than Jiujiang Shanshui. However, Kuangda Technology is 2.06 times more volatile than Jiujiang Shanshui Technology. It trades about 0.11 of its potential returns per unit of risk. Jiujiang Shanshui Technology is currently generating about 0.16 per unit of risk. If you would invest  505.00  in Kuangda Technology Group on November 19, 2024 and sell it today you would earn a total of  12.00  from holding Kuangda Technology Group or generate 2.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.75%
Values	Daily Returns

Kuangda Technology Group  vs.  Jiujiang Shanshui Technology

Kuangda Technology

Risk-Adjusted Performance

Very 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.

Jiujiang Shanshui

Risk-Adjusted Performance

Very Weak

Over the last 90 days Jiujiang Shanshui Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Jiujiang Shanshui 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 Jiujiang Shanshui

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

The idea behind Kuangda Technology Group and Jiujiang Shanshui 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.