Correlation Between Carnival Industrial and Kwong Fong

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

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

Diversification Opportunities for Carnival Industrial and Kwong Fong

0.75

Correlation Coefficient

Carnival Industrial  Kwong Fong

Poor diversification

The 3 months correlation between Carnival and Kwong is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Carnival Industrial Corp 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 Carnival Industrial 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 Carnival Industrial Corp 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 Carnival Industrial i.e., Carnival Industrial and Kwong Fong go up and down completely randomly.

Pair Corralation between Carnival Industrial and Kwong Fong

Assuming the 90 days trading horizon Carnival Industrial Corp is expected to under-perform the Kwong Fong. In addition to that, Carnival Industrial is 1.39 times more volatile than Kwong Fong Industries. It trades about -0.06 of its total potential returns per unit of risk. Kwong Fong Industries is currently generating about -0.03 per unit of volatility. If you would invest  1,300  in Kwong Fong Industries on December 22, 2024 and sell it today you would lose (20.00) from holding Kwong Fong Industries or give up 1.54% of portfolio value over 90 days.

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

Carnival Industrial Corp  vs.  Kwong Fong Industries

Carnival Industrial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carnival Industrial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carnival Industrial 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 latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Carnival Industrial and Kwong Fong

The main advantage of trading using opposite Carnival Industrial and Kwong Fong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnival Industrial 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 Carnival Industrial Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.