Correlation Between Kedge Construction and U Ming

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

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

Diversification Opportunities for Kedge Construction and U Ming

0.77

Correlation Coefficient

Kedge Construction  U Ming

Poor diversification

The 3 months correlation between Kedge and 2606 is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Kedge Construction Co and U Ming Marine Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on U Ming Marine and Kedge 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 Kedge Construction Co are associated (or correlated) with U Ming. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of U Ming Marine has no effect on the direction of Kedge Construction i.e., Kedge Construction and U Ming go up and down completely randomly.

Pair Corralation between Kedge Construction and U Ming

Assuming the 90 days trading horizon Kedge Construction Co is expected to generate 0.82 times more return on investment than U Ming. However, Kedge Construction Co is 1.22 times less risky than U Ming. It trades about 0.05 of its potential returns per unit of risk. U Ming Marine Transport is currently generating about 0.03 per unit of risk. If you would invest  5,774  in Kedge Construction Co on December 4, 2024 and sell it today you would earn a total of  2,526  from holding Kedge Construction Co or generate 43.75% return on investment over 90 days.

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

Kedge Construction Co  vs.  U Ming Marine Transport

Kedge Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kedge Construction Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kedge Construction showed solid returns over the last few months and may actually be approaching a breakup point.

U Ming Marine

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in U Ming Marine Transport are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, U Ming showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kedge Construction and U Ming

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

The idea behind Kedge Construction Co and U Ming Marine Transport 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.