Correlation Between King Strong and CareRay Digital

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

Diversification Opportunities for King Strong and CareRay Digital

0.9

Correlation Coefficient

King Strong  CareRay Digital

Almost no diversification

The 3 months correlation between King and CareRay is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding King Strong New Material and CareRay Digital Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CareRay Digital Medical 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 CareRay Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CareRay Digital Medical has no effect on the direction of King Strong i.e., King Strong and CareRay Digital go up and down completely randomly.

Pair Corralation between King Strong and CareRay Digital

Assuming the 90 days trading horizon King Strong New Material is expected to under-perform the CareRay Digital. In addition to that, King Strong is 1.14 times more volatile than CareRay Digital Medical. It trades about -0.34 of its total potential returns per unit of risk. CareRay Digital Medical is currently generating about -0.35 per unit of volatility. If you would invest  1,591  in CareRay Digital Medical on October 11, 2024 and sell it today you would lose (286.00) from holding CareRay Digital Medical or give up 17.98% of portfolio value over 90 days.

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

King Strong New Material  vs.  CareRay Digital Medical

King Strong New

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in King Strong New Material are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, King Strong may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CareRay Digital Medical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CareRay Digital Medical are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, CareRay Digital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with King Strong and CareRay Digital

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

The idea behind King Strong New Material and CareRay Digital Medical 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.