Correlation Between Kuang Chi and Sportsoul

Can any of the company-specific risk be diversified away by investing in both Kuang Chi and Sportsoul 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 Kuang Chi and Sportsoul into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kuang Chi Technologies and Sportsoul Co Ltd, you can compare the effects of market volatilities on Kuang Chi and Sportsoul 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 Kuang Chi with a short position of Sportsoul. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuang Chi and Sportsoul.

Diversification Opportunities for Kuang Chi and Sportsoul

-0.31

Correlation Coefficient

Kuang Chi  Sportsoul

Very good diversification

The 3 months correlation between Kuang and Sportsoul is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Sportsoul Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sportsoul and Kuang Chi 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 Kuang Chi Technologies are associated (or correlated) with Sportsoul. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sportsoul has no effect on the direction of Kuang Chi i.e., Kuang Chi and Sportsoul go up and down completely randomly.

Pair Corralation between Kuang Chi and Sportsoul

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 1.05 times more return on investment than Sportsoul. However, Kuang Chi is 1.05 times more volatile than Sportsoul Co Ltd. It trades about 0.04 of its potential returns per unit of risk. Sportsoul Co Ltd is currently generating about -0.05 per unit of risk. If you would invest  3,937  in Kuang Chi Technologies on December 4, 2024 and sell it today you would earn a total of  181.00  from holding Kuang Chi Technologies or generate 4.6% return on investment over 90 days.

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

Kuang Chi Technologies  vs.  Sportsoul Co Ltd

Kuang Chi Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sportsoul

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sportsoul Co Ltd 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 Kuang Chi and Sportsoul

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

The idea behind Kuang Chi Technologies and Sportsoul Co Ltd 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.