Correlation Between Kao Fong and Genovate Biotechnology

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

Diversification Opportunities for Kao Fong and Genovate Biotechnology

-0.52

Correlation Coefficient

Kao Fong  Genovate Biotechnology

Excellent diversification

The 3 months correlation between Kao and Genovate is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Genovate Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genovate Biotechnology 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 Genovate Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genovate Biotechnology has no effect on the direction of Kao Fong i.e., Kao Fong and Genovate Biotechnology go up and down completely randomly.

Pair Corralation between Kao Fong and Genovate Biotechnology

Assuming the 90 days trading horizon Kao Fong Machinery is expected to generate 6.45 times more return on investment than Genovate Biotechnology. However, Kao Fong is 6.45 times more volatile than Genovate Biotechnology Co. It trades about 0.07 of its potential returns per unit of risk. Genovate Biotechnology Co is currently generating about -0.25 per unit of risk. If you would invest  4,295  in Kao Fong Machinery on October 7, 2024 and sell it today you would earn a total of  595.00  from holding Kao Fong Machinery or generate 13.85% return on investment over 90 days.

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

Kao Fong Machinery  vs.  Genovate Biotechnology Co

Kao Fong Machinery

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kao Fong Machinery are ranked lower than 5 (%) 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.

Genovate Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genovate Biotechnology Co 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 Kao Fong and Genovate Biotechnology

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

The idea behind Kao Fong Machinery and Genovate Biotechnology Co 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.