Correlation Between Chengdu Kanghua and INKON Life

Can any of the company-specific risk be diversified away by investing in both Chengdu Kanghua and INKON Life 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 Chengdu Kanghua and INKON Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chengdu Kanghua Biological and INKON Life Technology, you can compare the effects of market volatilities on Chengdu Kanghua and INKON Life 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 Chengdu Kanghua with a short position of INKON Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chengdu Kanghua and INKON Life.

Diversification Opportunities for Chengdu Kanghua and INKON Life

0.4

Correlation Coefficient

Chengdu Kanghua  INKON Life

Very weak diversification

The 3 months correlation between Chengdu and INKON is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chengdu Kanghua Biological and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and Chengdu Kanghua 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 Chengdu Kanghua Biological are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of Chengdu Kanghua i.e., Chengdu Kanghua and INKON Life go up and down completely randomly.

Pair Corralation between Chengdu Kanghua and INKON Life

Assuming the 90 days trading horizon Chengdu Kanghua Biological is expected to under-perform the INKON Life. But the stock apears to be less risky and, when comparing its historical volatility, Chengdu Kanghua Biological is 1.09 times less risky than INKON Life. The stock trades about -0.21 of its potential returns per unit of risk. The INKON Life Technology is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,099  in INKON Life Technology on October 5, 2024 and sell it today you would lose (203.00) from holding INKON Life Technology or give up 18.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Chengdu Kanghua Biological  vs.  INKON Life Technology

Chengdu Kanghua Biol

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chengdu Kanghua Biological 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.

INKON Life Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INKON Life Technology 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 Chengdu Kanghua and INKON Life

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

The idea behind Chengdu Kanghua Biological and INKON Life Technology 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.