Correlation Between Kuangda Technology and Shandong Gold

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

Diversification Opportunities for Kuangda Technology and Shandong Gold

0.14

Correlation Coefficient

Kuangda Technology  Shandong Gold

Average diversification

The 3 months correlation between Kuangda and Shandong is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Shandong Gold Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shandong Gold Mining 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 Shandong Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shandong Gold Mining has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Shandong Gold go up and down completely randomly.

Pair Corralation between Kuangda Technology and Shandong Gold

Assuming the 90 days trading horizon Kuangda Technology is expected to generate 7.39 times less return on investment than Shandong Gold. In addition to that, Kuangda Technology is 1.04 times more volatile than Shandong Gold Mining. It trades about 0.01 of its total potential returns per unit of risk. Shandong Gold Mining is currently generating about 0.11 per unit of volatility. If you would invest  2,316  in Shandong Gold Mining on December 27, 2024 and sell it today you would earn a total of  280.00  from holding Shandong Gold Mining or generate 12.09% return on investment over 90 days.

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

Kuangda Technology Group  vs.  Shandong Gold Mining

Kuangda Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Shandong Gold Mining

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shandong Gold Mining are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Shandong Gold sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuangda Technology and Shandong Gold

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

The idea behind Kuangda Technology Group and Shandong Gold Mining 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.

Check out your portfolio center.

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.