Correlation Between Great Wall and Li Kang
Can any of the company-specific risk be diversified away by investing in both Great Wall and Li Kang 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 Great Wall and Li Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Wall Enterprise and Li Kang Biomedical, you can compare the effects of market volatilities on Great Wall and Li Kang 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 Great Wall with a short position of Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Wall and Li Kang.
Diversification Opportunities for Great Wall and Li Kang
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and 6242 is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Great Wall Enterprise and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical and Great Wall 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 Great Wall Enterprise are associated (or correlated) with Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of Great Wall i.e., Great Wall and Li Kang go up and down completely randomly.
Pair Corralation between Great Wall and Li Kang
Assuming the 90 days trading horizon Great Wall Enterprise is expected to generate 0.46 times more return on investment than Li Kang. However, Great Wall Enterprise is 2.19 times less risky than Li Kang. It trades about 0.26 of its potential returns per unit of risk. Li Kang Biomedical is currently generating about 0.04 per unit of risk. If you would invest 5,190 in Great Wall Enterprise on December 29, 2024 and sell it today you would earn a total of 630.00 from holding Great Wall Enterprise or generate 12.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Great Wall Enterprise vs. Li Kang Biomedical
Performance |
Timeline |
Great Wall Enterprise |
Li Kang Biomedical |
Great Wall and Li Kang Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Wall and Li Kang
The main advantage of trading using opposite Great Wall and Li Kang positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Wall position performs unexpectedly, Li Kang 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 Li Kang will offset losses from the drop in Li Kang's long position.Great Wall vs. Charoen Pokphand Enterprise | Great Wall vs. Uni President Enterprises Corp | Great Wall vs. Lien Hwa Industrial | Great Wall vs. Standard Foods Corp |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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