Correlation Between Kuang Chi and Xiamen Faratronic

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

Diversification Opportunities for Kuang Chi and Xiamen Faratronic

-0.08

Correlation Coefficient

Kuang Chi  Xiamen Faratronic

Good diversification

The 3 months correlation between Kuang and Xiamen is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and Xiamen Faratronic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xiamen Faratronic 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 Xiamen Faratronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xiamen Faratronic has no effect on the direction of Kuang Chi i.e., Kuang Chi and Xiamen Faratronic go up and down completely randomly.

Pair Corralation between Kuang Chi and Xiamen Faratronic

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to under-perform the Xiamen Faratronic. In addition to that, Kuang Chi is 1.12 times more volatile than Xiamen Faratronic Co. It trades about -0.07 of its total potential returns per unit of risk. Xiamen Faratronic Co is currently generating about -0.03 per unit of volatility. If you would invest  11,896  in Xiamen Faratronic Co on December 26, 2024 and sell it today you would lose (746.00) from holding Xiamen Faratronic Co or give up 6.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Kuang Chi Technologies  vs.  Xiamen Faratronic Co

Kuang Chi Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kuang Chi Technologies 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xiamen Faratronic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xiamen Faratronic Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Xiamen Faratronic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kuang Chi and Xiamen Faratronic

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

The idea behind Kuang Chi Technologies and Xiamen Faratronic Co 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.