Correlation Between King Strong and Hunan Tyen

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

Diversification Opportunities for King Strong and Hunan Tyen

0.52

Correlation Coefficient

King Strong  Hunan Tyen

Very weak diversification

The 3 months correlation between King and Hunan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and Hunan Tyen Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hunan Tyen Machinery 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 Hunan Tyen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hunan Tyen Machinery has no effect on the direction of King Strong i.e., King Strong and Hunan Tyen go up and down completely randomly.

Pair Corralation between King Strong and Hunan Tyen

Assuming the 90 days trading horizon King Strong is expected to generate 14.08 times less return on investment than Hunan Tyen. But when comparing it to its historical volatility, King Strong New Material is 1.67 times less risky than Hunan Tyen. It trades about 0.02 of its potential returns per unit of risk. Hunan Tyen Machinery is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  487.00  in Hunan Tyen Machinery on December 24, 2024 and sell it today you would earn a total of  206.00  from holding Hunan Tyen Machinery or generate 42.3% return on investment over 90 days.

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

King Strong New Material  vs.  Hunan Tyen Machinery

King Strong New

Risk-Adjusted Performance

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.

Hunan Tyen Machinery

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hunan Tyen Machinery are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hunan Tyen sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with King Strong and Hunan Tyen

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

The idea behind King Strong New Material and Hunan Tyen Machinery 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.