Correlation Between Kuang Chi and Dongguan Chitwing

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

Diversification Opportunities for Kuang Chi and Dongguan Chitwing

0.36

Correlation Coefficient

Kuang Chi  Dongguan Chitwing

Weak diversification

The 3 months correlation between Kuang and Dongguan is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Dongguan Chitwing Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dongguan Chitwing 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 Dongguan Chitwing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dongguan Chitwing has no effect on the direction of Kuang Chi i.e., Kuang Chi and Dongguan Chitwing go up and down completely randomly.

Pair Corralation between Kuang Chi and Dongguan Chitwing

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 1.03 times more return on investment than Dongguan Chitwing. However, Kuang Chi is 1.03 times more volatile than Dongguan Chitwing Technology. It trades about -0.08 of its potential returns per unit of risk. Dongguan Chitwing Technology is currently generating about -0.18 per unit of risk. If you would invest  4,750  in Kuang Chi Technologies on October 7, 2024 and sell it today you would lose (704.00) from holding Kuang Chi Technologies or give up 14.82% of portfolio value over 90 days.

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

Kuang Chi Technologies  vs.  Dongguan Chitwing Technology

Kuang Chi Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi sustained solid returns over the last few months and may actually be approaching a breakup point.

Dongguan Chitwing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dongguan Chitwing Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Kuang Chi and Dongguan Chitwing

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

The idea behind Kuang Chi Technologies and Dongguan Chitwing Technology 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.