Correlation Between Nan Yang and Kwong Fong

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

By analyzing existing cross correlation between Nan Yang Dyeing and Kwong Fong Industries, you can compare the effects of market volatilities on Nan Yang and Kwong Fong 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 Nan Yang with a short position of Kwong Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nan Yang and Kwong Fong.

Diversification Opportunities for Nan Yang and Kwong Fong

0.36

Correlation Coefficient

Nan Yang  Kwong Fong

Weak diversification

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

Pair Corralation between Nan Yang and Kwong Fong

Assuming the 90 days trading horizon Nan Yang Dyeing is expected to generate 1.24 times more return on investment than Kwong Fong. However, Nan Yang is 1.24 times more volatile than Kwong Fong Industries. It trades about -0.01 of its potential returns per unit of risk. Kwong Fong Industries is currently generating about -0.01 per unit of risk. If you would invest  3,605  in Nan Yang Dyeing on December 20, 2024 and sell it today you would lose (25.00) from holding Nan Yang Dyeing or give up 0.69% of portfolio value over 90 days.

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

Nan Yang Dyeing  vs.  Kwong Fong Industries

Nan Yang Dyeing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nan Yang Dyeing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Nan Yang is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kwong Fong Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kwong Fong Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kwong Fong is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Nan Yang and Kwong Fong

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

The idea behind Nan Yang Dyeing and Kwong Fong Industries 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.