Correlation Between Kwong Fong and Victory New

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

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

Diversification Opportunities for Kwong Fong and Victory New

0.44

Correlation Coefficient

Kwong Fong  Victory New

Very weak diversification

The 3 months correlation between Kwong and Victory is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Victory New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory New Materials and Kwong Fong 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 Kwong Fong Industries are associated (or correlated) with Victory New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory New Materials has no effect on the direction of Kwong Fong i.e., Kwong Fong and Victory New go up and down completely randomly.

Pair Corralation between Kwong Fong and Victory New

Assuming the 90 days trading horizon Kwong Fong Industries is expected to generate 2.89 times more return on investment than Victory New. However, Kwong Fong is 2.89 times more volatile than Victory New Materials. It trades about 0.14 of its potential returns per unit of risk. Victory New Materials is currently generating about -0.3 per unit of risk. If you would invest  1,265  in Kwong Fong Industries on September 16, 2024 and sell it today you would earn a total of  50.00  from holding Kwong Fong Industries or generate 3.95% return on investment over 90 days.

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

Kwong Fong Industries  vs.  Victory New Materials

Kwong Fong Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kwong Fong Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kwong Fong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Victory New Materials

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kwong Fong and Victory New

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

The idea behind Kwong Fong Industries and Victory New Materials 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.