Correlation Between Konfoong Materials and Shenzhen Sunway

Can any of the company-specific risk be diversified away by investing in both Konfoong Materials and Shenzhen Sunway 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 Konfoong Materials and Shenzhen Sunway into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Konfoong Materials International and Shenzhen Sunway Communication, you can compare the effects of market volatilities on Konfoong Materials and Shenzhen Sunway 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 Konfoong Materials with a short position of Shenzhen Sunway. Check out your portfolio center. Please also check ongoing floating volatility patterns of Konfoong Materials and Shenzhen Sunway.

Diversification Opportunities for Konfoong Materials and Shenzhen Sunway

0.92

Correlation Coefficient

Konfoong Materials  Shenzhen Sunway

Almost no diversification

The 3 months correlation between Konfoong and Shenzhen is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Konfoong Materials Internation and Shenzhen Sunway Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Sunway Comm and Konfoong Materials 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 Konfoong Materials International are associated (or correlated) with Shenzhen Sunway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Sunway Comm has no effect on the direction of Konfoong Materials i.e., Konfoong Materials and Shenzhen Sunway go up and down completely randomly.

Pair Corralation between Konfoong Materials and Shenzhen Sunway

Assuming the 90 days trading horizon Konfoong Materials International is expected to under-perform the Shenzhen Sunway. But the stock apears to be less risky and, when comparing its historical volatility, Konfoong Materials International is 1.26 times less risky than Shenzhen Sunway. The stock trades about -0.3 of its potential returns per unit of risk. The Shenzhen Sunway Communication is currently generating about -0.19 of returns per unit of risk over similar time horizon. If you would invest  2,595  in Shenzhen Sunway Communication on October 8, 2024 and sell it today you would lose (284.00) from holding Shenzhen Sunway Communication or give up 10.94% of portfolio value over 90 days.

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

Konfoong Materials Internation  vs.  Shenzhen Sunway Communication

Konfoong Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Konfoong Materials International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Shenzhen Sunway Comm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shenzhen Sunway Communication 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 Konfoong Materials and Shenzhen Sunway

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

The idea behind Konfoong Materials International and Shenzhen Sunway Communication 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.