Correlation Between Kuang Chi and CareRay Digital

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

Diversification Opportunities for Kuang Chi and CareRay Digital

0.88

Correlation Coefficient

Kuang Chi  CareRay Digital

Very poor diversification

The 3 months correlation between Kuang and CareRay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Chi Technologies and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of Kuang Chi i.e., Kuang Chi and CareRay Digital go up and down completely randomly.

Pair Corralation between Kuang Chi and CareRay Digital

Assuming the 90 days trading horizon Kuang Chi Technologies is expected to generate 0.87 times more return on investment than CareRay Digital. However, Kuang Chi Technologies is 1.14 times less risky than CareRay Digital. It trades about 0.3 of its potential returns per unit of risk. CareRay Digital Medical is currently generating about -0.12 per unit of risk. If you would invest  3,846  in Kuang Chi Technologies on September 27, 2024 and sell it today you would earn a total of  569.00  from holding Kuang Chi Technologies or generate 14.79% return on investment over 90 days.

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

Kuang Chi Technologies  vs.  CareRay Digital Medical

Kuang Chi Technologies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 20 (%) 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.

CareRay Digital Medical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuang Chi and CareRay Digital

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

The idea behind Kuang Chi Technologies and CareRay Digital Medical 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.