Correlation Between Ma Kuang and Century Wind

Can any of the company-specific risk be diversified away by investing in both Ma Kuang and Century Wind 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 Ma Kuang and Century Wind into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ma Kuang Healthcare and Century Wind Power, you can compare the effects of market volatilities on Ma Kuang and Century Wind 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 Ma Kuang with a short position of Century Wind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ma Kuang and Century Wind.

Diversification Opportunities for Ma Kuang and Century Wind

0.39

Correlation Coefficient

Ma Kuang  Century Wind

Weak diversification

The 3 months correlation between 4139 and Century is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ma Kuang Healthcare and Century Wind Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Wind Power and Ma Kuang 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 Ma Kuang Healthcare are associated (or correlated) with Century Wind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Wind Power has no effect on the direction of Ma Kuang i.e., Ma Kuang and Century Wind go up and down completely randomly.

Pair Corralation between Ma Kuang and Century Wind

Assuming the 90 days trading horizon Ma Kuang Healthcare is expected to generate 1.63 times more return on investment than Century Wind. However, Ma Kuang is 1.63 times more volatile than Century Wind Power. It trades about 0.22 of its potential returns per unit of risk. Century Wind Power is currently generating about -0.22 per unit of risk. If you would invest  2,985  in Ma Kuang Healthcare on October 4, 2024 and sell it today you would earn a total of  245.00  from holding Ma Kuang Healthcare or generate 8.21% return on investment over 90 days.

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

Ma Kuang Healthcare  vs.  Century Wind Power

Ma Kuang Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ma Kuang Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Century Wind Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Wind Power has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Ma Kuang and Century Wind

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

The idea behind Ma Kuang Healthcare and Century Wind 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.