Correlation Between Kwong Fong and Lily Textile

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

Diversification Opportunities for Kwong Fong and Lily Textile

0.76

Correlation Coefficient

Kwong Fong  Lily Textile

Poor diversification

The 3 months correlation between Kwong and Lily is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Lily Textile Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lily Textile 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 Lily Textile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lily Textile has no effect on the direction of Kwong Fong i.e., Kwong Fong and Lily Textile go up and down completely randomly.

Pair Corralation between Kwong Fong and Lily Textile

Assuming the 90 days trading horizon Kwong Fong Industries is expected to generate 1.26 times more return on investment than Lily Textile. However, Kwong Fong is 1.26 times more volatile than Lily Textile Co. It trades about -0.14 of its potential returns per unit of risk. Lily Textile Co is currently generating about -0.19 per unit of risk. If you would invest  1,385  in Kwong Fong Industries on October 26, 2024 and sell it today you would lose (150.00) from holding Kwong Fong Industries or give up 10.83% of portfolio value over 90 days.

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

Kwong Fong Industries  vs.  Lily Textile Co

Kwong Fong Industries

Risk-Adjusted Performance

0 of 100

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Lily Textile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lily Textile Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Kwong Fong and Lily Textile

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

The idea behind Kwong Fong Industries and Lily Textile 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.