Correlation Between Kao Fong and Univacco Technology

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

Diversification Opportunities for Kao Fong and Univacco Technology

0.31

Correlation Coefficient

Kao Fong  Univacco Technology

Weak diversification

The 3 months correlation between Kao and Univacco is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Univacco Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Univacco Technology 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 Univacco Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Univacco Technology has no effect on the direction of Kao Fong i.e., Kao Fong and Univacco Technology go up and down completely randomly.

Pair Corralation between Kao Fong and Univacco Technology

Assuming the 90 days trading horizon Kao Fong Machinery is expected to generate 1.82 times more return on investment than Univacco Technology. However, Kao Fong is 1.82 times more volatile than Univacco Technology. It trades about 0.15 of its potential returns per unit of risk. Univacco Technology is currently generating about -0.2 per unit of risk. If you would invest  4,130  in Kao Fong Machinery on September 20, 2024 and sell it today you would earn a total of  595.00  from holding Kao Fong Machinery or generate 14.41% return on investment over 90 days.

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

Kao Fong Machinery  vs.  Univacco Technology

Kao Fong Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kao Fong Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Univacco Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Univacco Technology 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 January 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 Univacco Technology

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

The idea behind Kao Fong Machinery and Univacco 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.