Correlation Between Kuangda Technology and Shanghai Xinhua

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

Diversification Opportunities for Kuangda Technology and Shanghai Xinhua

0.74

Correlation Coefficient

Kuangda Technology  Shanghai Xinhua

Poor diversification

The 3 months correlation between Kuangda and Shanghai is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Shanghai Xinhua Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shanghai Xinhua Media 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 Shanghai Xinhua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shanghai Xinhua Media has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Shanghai Xinhua go up and down completely randomly.

Pair Corralation between Kuangda Technology and Shanghai Xinhua

Assuming the 90 days trading horizon Kuangda Technology is expected to generate 6.18 times less return on investment than Shanghai Xinhua. But when comparing it to its historical volatility, Kuangda Technology Group is 1.52 times less risky than Shanghai Xinhua. It trades about 0.01 of its potential returns per unit of risk. Shanghai Xinhua Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  398.00  in Shanghai Xinhua Media on October 26, 2024 and sell it today you would earn a total of  213.00  from holding Shanghai Xinhua Media or generate 53.52% 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.  Shanghai Xinhua Media

Kuangda Technology

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shanghai Xinhua Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Kuangda Technology Group and Shanghai Xinhua Media 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.