Correlation Between King Strong and Shengyuan Environmental

Can any of the company-specific risk be diversified away by investing in both King Strong and Shengyuan Environmental 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 King Strong and Shengyuan Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between King Strong New Material and Shengyuan Environmental Protection, you can compare the effects of market volatilities on King Strong and Shengyuan Environmental 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 King Strong with a short position of Shengyuan Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Shengyuan Environmental.

Diversification Opportunities for King Strong and Shengyuan Environmental

0.91

Correlation Coefficient

King Strong  Shengyuan Environmental

Almost no diversification

The 3 months correlation between King and Shengyuan is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Shengyuan Environmental Protec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shengyuan Environmental and King Strong 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 King Strong New Material are associated (or correlated) with Shengyuan Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shengyuan Environmental has no effect on the direction of King Strong i.e., King Strong and Shengyuan Environmental go up and down completely randomly.

Pair Corralation between King Strong and Shengyuan Environmental

Assuming the 90 days trading horizon King Strong New Material is expected to generate 1.77 times more return on investment than Shengyuan Environmental. However, King Strong is 1.77 times more volatile than Shengyuan Environmental Protection. It trades about 0.02 of its potential returns per unit of risk. Shengyuan Environmental Protection is currently generating about 0.02 per unit of risk. If you would invest  2,203  in King Strong New Material on December 24, 2024 and sell it today you would earn a total of  25.00  from holding King Strong New Material or generate 1.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

King Strong New Material  vs.  Shengyuan Environmental Protec

King Strong New

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, King Strong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shengyuan Environmental

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shengyuan Environmental Protection are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shengyuan Environmental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with King Strong and Shengyuan Environmental

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

The idea behind King Strong New Material and Shengyuan Environmental Protection 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.