Correlation Between Kuangda Technology and Sichuan Hebang

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

Diversification Opportunities for Kuangda Technology and Sichuan Hebang

0.77

Correlation Coefficient

Kuangda Technology  Sichuan Hebang

Poor diversification

The 3 months correlation between Kuangda and Sichuan is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kuangda Technology Group and Sichuan Hebang Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sichuan Hebang Biote 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 Sichuan Hebang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sichuan Hebang Biote has no effect on the direction of Kuangda Technology i.e., Kuangda Technology and Sichuan Hebang go up and down completely randomly.

Pair Corralation between Kuangda Technology and Sichuan Hebang

Assuming the 90 days trading horizon Kuangda Technology Group is expected to under-perform the Sichuan Hebang. In addition to that, Kuangda Technology is 1.21 times more volatile than Sichuan Hebang Biotechnology. It trades about -0.3 of its total potential returns per unit of risk. Sichuan Hebang Biotechnology is currently generating about -0.11 per unit of volatility. If you would invest  210.00  in Sichuan Hebang Biotechnology on October 5, 2024 and sell it today you would lose (15.00) from holding Sichuan Hebang Biotechnology or give up 7.14% of portfolio value over 90 days.

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

Kuangda Technology Group  vs.  Sichuan Hebang Biotechnology

Kuangda Technology

Risk-Adjusted Performance

1 of 100

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.

Sichuan Hebang Biote

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sichuan Hebang Biotechnology 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.

Pair Trading with Kuangda Technology and Sichuan Hebang

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

The idea behind Kuangda Technology Group and Sichuan Hebang Biotechnology 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.