Correlation Between Kao Fong and Integrated Service

Can any of the company-specific risk be diversified away by investing in both Kao Fong and Integrated Service 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 Integrated Service 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 Integrated Service Technology, you can compare the effects of market volatilities on Kao Fong and Integrated Service 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 Integrated Service. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and Integrated Service.

Diversification Opportunities for Kao Fong and Integrated Service

-0.46

Correlation Coefficient

Kao Fong  Integrated Service

Very good diversification

The 3 months correlation between Kao and Integrated is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Integrated Service Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Integrated Service 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 Integrated Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Integrated Service has no effect on the direction of Kao Fong i.e., Kao Fong and Integrated Service go up and down completely randomly.

Pair Corralation between Kao Fong and Integrated Service

Assuming the 90 days trading horizon Kao Fong Machinery is expected to generate 1.2 times more return on investment than Integrated Service. However, Kao Fong is 1.2 times more volatile than Integrated Service Technology. It trades about 0.11 of its potential returns per unit of risk. Integrated Service Technology is currently generating about 0.05 per unit of risk. If you would invest  1,002  in Kao Fong Machinery on October 10, 2024 and sell it today you would earn a total of  3,728  from holding Kao Fong Machinery or generate 372.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Kao Fong Machinery  vs.  Integrated Service Technology

Kao Fong Machinery

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kao Fong Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kao Fong showed solid returns over the last few months and may actually be approaching a breakup point.

Integrated Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Integrated Service Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Kao Fong and Integrated Service

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

The idea behind Kao Fong Machinery and Integrated Service 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .