Correlation Between Kwong Fong and Yem Chio

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

Diversification Opportunities for Kwong Fong and Yem Chio

0.59

Correlation Coefficient

Kwong Fong  Yem Chio

Very weak diversification

The 3 months correlation between Kwong and Yem is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kwong Fong Industries and Yem Chio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yem Chio 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 Yem Chio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yem Chio has no effect on the direction of Kwong Fong i.e., Kwong Fong and Yem Chio go up and down completely randomly.

Pair Corralation between Kwong Fong and Yem Chio

Assuming the 90 days trading horizon Kwong Fong Industries is expected to under-perform the Yem Chio. But the stock apears to be less risky and, when comparing its historical volatility, Kwong Fong Industries is 1.03 times less risky than Yem Chio. The stock trades about 0.0 of its potential returns per unit of risk. The Yem Chio Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,730  in Yem Chio Co on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Yem Chio Co or generate 2.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.25%
Values	Daily Returns

Kwong Fong Industries  vs.  Yem Chio Co

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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Yem Chio

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Yem Chio Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Yem Chio 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 Yem Chio

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

The idea behind Kwong Fong Industries and Yem Chio 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.