Correlation Between Loop Telecommunicatio and Kao Fong

Can any of the company-specific risk be diversified away by investing in both Loop Telecommunicatio and Kao Fong 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 Loop Telecommunicatio and Kao Fong into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Loop Telecommunication International and Kao Fong Machinery, you can compare the effects of market volatilities on Loop Telecommunicatio and Kao Fong 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 Loop Telecommunicatio with a short position of Kao Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loop Telecommunicatio and Kao Fong.

Diversification Opportunities for Loop Telecommunicatio and Kao Fong

0.34

Correlation Coefficient

Loop Telecommunicatio  Kao Fong

Weak diversification

The 3 months correlation between Loop and Kao is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Loop Telecommunication Interna and Kao Fong Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kao Fong Machinery and Loop Telecommunicatio 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 Loop Telecommunication International are associated (or correlated) with Kao Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kao Fong Machinery has no effect on the direction of Loop Telecommunicatio i.e., Loop Telecommunicatio and Kao Fong go up and down completely randomly.

Pair Corralation between Loop Telecommunicatio and Kao Fong

Assuming the 90 days trading horizon Loop Telecommunication International is expected to generate 1.52 times more return on investment than Kao Fong. However, Loop Telecommunicatio is 1.52 times more volatile than Kao Fong Machinery. It trades about -0.09 of its potential returns per unit of risk. Kao Fong Machinery is currently generating about -0.33 per unit of risk. If you would invest  7,580  in Loop Telecommunication International on October 26, 2024 and sell it today you would lose (690.00) from holding Loop Telecommunication International or give up 9.1% of portfolio value over 90 days.

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

Loop Telecommunication Interna  vs.  Kao Fong Machinery

Loop Telecommunication

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Loop Telecommunication International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Loop Telecommunicatio is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kao Fong Machinery

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kao Fong Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kao Fong is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Loop Telecommunicatio and Kao Fong

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

The idea behind Loop Telecommunication International and Kao Fong 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 Stocks Directory module to find actively traded stocks across global markets.