Correlation Between Kindom Construction and Taiwan Taomee

Can any of the company-specific risk be diversified away by investing in both Kindom Construction and Taiwan Taomee 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 Kindom Construction and Taiwan Taomee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kindom Construction Corp and Taiwan Taomee Co, you can compare the effects of market volatilities on Kindom Construction and Taiwan Taomee 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 Kindom Construction with a short position of Taiwan Taomee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kindom Construction and Taiwan Taomee.

Diversification Opportunities for Kindom Construction and Taiwan Taomee

-0.03

Correlation Coefficient

Kindom Construction  Taiwan Taomee

Good diversification

The 3 months correlation between Kindom and Taiwan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Kindom Construction Corp and Taiwan Taomee Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Taomee and Kindom Construction 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 Kindom Construction Corp are associated (or correlated) with Taiwan Taomee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Taomee has no effect on the direction of Kindom Construction i.e., Kindom Construction and Taiwan Taomee go up and down completely randomly.

Pair Corralation between Kindom Construction and Taiwan Taomee

Assuming the 90 days trading horizon Kindom Construction Corp is expected to generate 1.39 times more return on investment than Taiwan Taomee. However, Kindom Construction is 1.39 times more volatile than Taiwan Taomee Co. It trades about -0.05 of its potential returns per unit of risk. Taiwan Taomee Co is currently generating about -0.27 per unit of risk. If you would invest  5,180  in Kindom Construction Corp on October 27, 2024 and sell it today you would lose (90.00) from holding Kindom Construction Corp or give up 1.74% of portfolio value over 90 days.

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

Kindom Construction Corp  vs.  Taiwan Taomee Co

Kindom Construction Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kindom Construction Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kindom Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Taiwan Taomee

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taiwan Taomee Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Taiwan Taomee 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 Kindom Construction and Taiwan Taomee

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

The idea behind Kindom Construction Corp and Taiwan Taomee 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.