Correlation Between Gold Circuit and Kaimei Electronic

Can any of the company-specific risk be diversified away by investing in both Gold Circuit and Kaimei Electronic 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 Gold Circuit and Kaimei Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Gold Circuit Electronics and Kaimei Electronic Corp, you can compare the effects of market volatilities on Gold Circuit and Kaimei Electronic 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 Gold Circuit with a short position of Kaimei Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Circuit and Kaimei Electronic.

Diversification Opportunities for Gold Circuit and Kaimei Electronic

0.29

Correlation Coefficient

Gold Circuit  Kaimei Electronic

Modest diversification

The 3 months correlation between Gold and Kaimei is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gold Circuit Electronics and Kaimei Electronic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaimei Electronic Corp and Gold Circuit 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 Gold Circuit Electronics are associated (or correlated) with Kaimei Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaimei Electronic Corp has no effect on the direction of Gold Circuit i.e., Gold Circuit and Kaimei Electronic go up and down completely randomly.

Pair Corralation between Gold Circuit and Kaimei Electronic

Assuming the 90 days trading horizon Gold Circuit Electronics is expected to generate 0.89 times more return on investment than Kaimei Electronic. However, Gold Circuit Electronics is 1.13 times less risky than Kaimei Electronic. It trades about 0.16 of its potential returns per unit of risk. Kaimei Electronic Corp is currently generating about 0.03 per unit of risk. If you would invest  19,000  in Gold Circuit Electronics on October 8, 2024 and sell it today you would earn a total of  4,700  from holding Gold Circuit Electronics or generate 24.74% return on investment over 90 days.

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

Gold Circuit Electronics  vs.  Kaimei Electronic Corp

Gold Circuit Electronics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Circuit Electronics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Gold Circuit showed solid returns over the last few months and may actually be approaching a breakup point.

Kaimei Electronic Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaimei Electronic Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kaimei Electronic 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 Gold Circuit and Kaimei Electronic

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

The idea behind Gold Circuit Electronics and Kaimei Electronic Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.