Correlation Between Tradetool Auto and Kwong Fong

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

By analyzing existing cross correlation between Tradetool Auto Co and Kwong Fong Industries, you can compare the effects of market volatilities on Tradetool Auto and Kwong 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 Tradetool Auto with a short position of Kwong Fong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tradetool Auto and Kwong Fong.

Diversification Opportunities for Tradetool Auto and Kwong Fong

0.35

Correlation Coefficient

Tradetool Auto  Kwong Fong

Weak diversification

The 3 months correlation between Tradetool and Kwong is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Tradetool Auto Co and Kwong Fong Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kwong Fong Industries and Tradetool Auto 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 Tradetool Auto Co are associated (or correlated) with Kwong Fong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kwong Fong Industries has no effect on the direction of Tradetool Auto i.e., Tradetool Auto and Kwong Fong go up and down completely randomly.

Pair Corralation between Tradetool Auto and Kwong Fong

Assuming the 90 days trading horizon Tradetool Auto Co is expected to under-perform the Kwong Fong. In addition to that, Tradetool Auto is 2.89 times more volatile than Kwong Fong Industries. It trades about -0.18 of its total potential returns per unit of risk. Kwong Fong Industries is currently generating about -0.27 per unit of volatility. If you would invest  1,335  in Kwong Fong Industries on October 8, 2024 and sell it today you would lose (65.00) from holding Kwong Fong Industries or give up 4.87% of portfolio value over 90 days.

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

Tradetool Auto Co  vs.  Kwong Fong Industries

Tradetool Auto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tradetool Auto Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Kwong Fong Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tradetool Auto and Kwong Fong

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

The idea behind Tradetool Auto Co and Kwong Fong Industries 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.