Correlation Between Kao Fong and Chinese Maritime

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

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

Diversification Opportunities for Kao Fong and Chinese Maritime

-0.3

Correlation Coefficient

Kao Fong  Chinese Maritime

Very good diversification

The 3 months correlation between Kao and Chinese is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Chinese Maritime Transport in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chinese Maritime Tra and Kao Fong 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 Kao Fong Machinery are associated (or correlated) with Chinese Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chinese Maritime Tra has no effect on the direction of Kao Fong i.e., Kao Fong and Chinese Maritime go up and down completely randomly.

Pair Corralation between Kao Fong and Chinese Maritime

Assuming the 90 days trading horizon Kao Fong Machinery is expected to generate 4.48 times more return on investment than Chinese Maritime. However, Kao Fong is 4.48 times more volatile than Chinese Maritime Transport. It trades about 0.15 of its potential returns per unit of risk. Chinese Maritime Transport is currently generating about -0.52 per unit of risk. If you would invest  4,230  in Kao Fong Machinery on September 23, 2024 and sell it today you would earn a total of  595.00  from holding Kao Fong Machinery or generate 14.07% return on investment over 90 days.

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

Kao Fong Machinery  vs.  Chinese Maritime Transport

Kao Fong Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kao Fong Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kao Fong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chinese Maritime Tra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Maritime Transport has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Chinese Maritime 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 Kao Fong and Chinese Maritime

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

The idea behind Kao Fong Machinery and Chinese Maritime Transport 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..