Correlation Between Kwong Fong and De Licacy

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

Diversification Opportunities for Kwong Fong and De Licacy

0.46

Correlation Coefficient

Kwong Fong  De Licacy

Very weak diversification

The 3 months correlation between Kwong and 1464 is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and De Licacy Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on De Licacy Industrial 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 De Licacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of De Licacy Industrial has no effect on the direction of Kwong Fong i.e., Kwong Fong and De Licacy go up and down completely randomly.

Pair Corralation between Kwong Fong and De Licacy

Assuming the 90 days trading horizon Kwong Fong is expected to generate 2.13 times less return on investment than De Licacy. But when comparing it to its historical volatility, Kwong Fong Industries is 1.44 times less risky than De Licacy. It trades about 0.07 of its potential returns per unit of risk. De Licacy Industrial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,405  in De Licacy Industrial on September 13, 2024 and sell it today you would earn a total of  225.00  from holding De Licacy Industrial or generate 16.01% 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.  De Licacy Industrial

Kwong Fong Industries

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kwong Fong Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kwong Fong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

De Licacy Industrial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Licacy Industrial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, De Licacy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kwong Fong and De Licacy

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

The idea behind Kwong Fong Industries and De Licacy Industrial 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.