Correlation Between Konfoong Materials and Dalian Thermal

Can any of the company-specific risk be diversified away by investing in both Konfoong Materials and Dalian Thermal 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 Dalian Thermal 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 Dalian Thermal Power, you can compare the effects of market volatilities on Konfoong Materials and Dalian Thermal 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 Dalian Thermal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Konfoong Materials and Dalian Thermal.

Diversification Opportunities for Konfoong Materials and Dalian Thermal

-0.05

Correlation Coefficient

Konfoong Materials  Dalian Thermal

Good diversification

The 3 months correlation between Konfoong and Dalian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Konfoong Materials Internation and Dalian Thermal Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dalian Thermal Power 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 Dalian Thermal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dalian Thermal Power has no effect on the direction of Konfoong Materials i.e., Konfoong Materials and Dalian Thermal go up and down completely randomly.

Pair Corralation between Konfoong Materials and Dalian Thermal

Assuming the 90 days trading horizon Konfoong Materials International is expected to under-perform the Dalian Thermal. But the stock apears to be less risky and, when comparing its historical volatility, Konfoong Materials International is 1.05 times less risky than Dalian Thermal. The stock trades about -0.03 of its potential returns per unit of risk. The Dalian Thermal Power is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  711.00  in Dalian Thermal Power on December 26, 2024 and sell it today you would lose (3.00) from holding Dalian Thermal Power or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Konfoong Materials Internation  vs.  Dalian Thermal Power

Konfoong Materials

Risk-Adjusted Performance

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 somewhat strong basic indicators, Konfoong Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dalian Thermal Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dalian Thermal Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Dalian Thermal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Konfoong Materials and Dalian Thermal

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

The idea behind Konfoong Materials International and Dalian Thermal Power 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.