Correlation Between King Strong and Chinese Universe

Can any of the company-specific risk be diversified away by investing in both King Strong and Chinese Universe 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 Chinese Universe 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 Chinese Universe Publishing, you can compare the effects of market volatilities on King Strong and Chinese Universe 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 Chinese Universe. Check out your portfolio center. Please also check ongoing floating volatility patterns of King Strong and Chinese Universe.

Diversification Opportunities for King Strong and Chinese Universe

0.32

Correlation Coefficient

King Strong  Chinese Universe

Weak diversification

The 3 months correlation between King and Chinese is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Chinese Universe Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Universe Pub 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 Chinese Universe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Universe Pub has no effect on the direction of King Strong i.e., King Strong and Chinese Universe go up and down completely randomly.

Pair Corralation between King Strong and Chinese Universe

Assuming the 90 days trading horizon King Strong New Material is expected to generate 1.65 times more return on investment than Chinese Universe. However, King Strong is 1.65 times more volatile than Chinese Universe Publishing. It trades about -0.16 of its potential returns per unit of risk. Chinese Universe Publishing is currently generating about -0.29 per unit of risk. If you would invest  2,185  in King Strong New Material on October 23, 2024 and sell it today you would lose (190.00) from holding King Strong New Material or give up 8.7% of portfolio value over 90 days.

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

King Strong New Material  vs.  Chinese Universe Publishing

King Strong New

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days King Strong New Material has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing 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.

Pair Trading with King Strong and Chinese Universe

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

The idea behind King Strong New Material and Chinese Universe Publishing 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.