Correlation Between Kuangda Technology and Tonghua Grape

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

Diversification Opportunities for Kuangda Technology and Tonghua Grape

0.86

Correlation Coefficient

Kuangda Technology  Tonghua Grape

Very poor diversification

The 3 months correlation between Kuangda and Tonghua is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Tonghua Grape Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonghua Grape Wine 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 Tonghua Grape. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonghua Grape Wine has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Tonghua Grape go up and down completely randomly.

Pair Corralation between Kuangda Technology and Tonghua Grape

Assuming the 90 days trading horizon Kuangda Technology is expected to generate 1.78 times less return on investment than Tonghua Grape. In addition to that, Kuangda Technology is 1.57 times more volatile than Tonghua Grape Wine. It trades about 0.05 of its total potential returns per unit of risk. Tonghua Grape Wine is currently generating about 0.15 per unit of volatility. If you would invest  293.00  in Tonghua Grape Wine on September 22, 2024 and sell it today you would earn a total of  21.00  from holding Tonghua Grape Wine or generate 7.17% return on investment over 90 days.

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

Kuangda Technology Group  vs.  Tonghua Grape Wine

Kuangda Technology

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 14 (%) 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.

Tonghua Grape Wine

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tonghua Grape Wine are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tonghua Grape sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuangda Technology and Tonghua Grape

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

The idea behind Kuangda Technology Group and Tonghua Grape Wine 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.