Correlation Between Shantou Wanshun and Kuangda Technology

Can any of the company-specific risk be diversified away by investing in both Shantou Wanshun and Kuangda Technology 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 Shantou Wanshun and Kuangda Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shantou Wanshun Package and Kuangda Technology Group, you can compare the effects of market volatilities on Shantou Wanshun and Kuangda Technology 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 Shantou Wanshun with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shantou Wanshun and Kuangda Technology.

Diversification Opportunities for Shantou Wanshun and Kuangda Technology

0.62

Correlation Coefficient

Shantou Wanshun  Kuangda Technology

Poor diversification

The 3 months correlation between Shantou and Kuangda is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Shantou Wanshun Package and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Shantou Wanshun 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 Shantou Wanshun Package are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Shantou Wanshun i.e., Shantou Wanshun and Kuangda Technology go up and down completely randomly.

Pair Corralation between Shantou Wanshun and Kuangda Technology

Assuming the 90 days trading horizon Shantou Wanshun Package is expected to under-perform the Kuangda Technology. In addition to that, Shantou Wanshun is 1.3 times more volatile than Kuangda Technology Group. It trades about -0.03 of its total potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.01 per unit of volatility. If you would invest  506.00  in Kuangda Technology Group on October 3, 2024 and sell it today you would earn a total of  1.00  from holding Kuangda Technology Group or generate 0.2% return on investment over 90 days.

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

Shantou Wanshun Package  vs.  Kuangda Technology Group

Shantou Wanshun Package

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shantou Wanshun Package has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kuangda Technology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kuangda Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shantou Wanshun and Kuangda Technology

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

The idea behind Shantou Wanshun Package and Kuangda Technology Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.