Correlation Between Kao Fong and Onyx Healthcare

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

Diversification Opportunities for Kao Fong and Onyx Healthcare

-0.23

Correlation Coefficient

Kao Fong  Onyx Healthcare

Very good diversification

The 3 months correlation between Kao and Onyx is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and Onyx Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onyx Healthcare 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 Onyx Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onyx Healthcare has no effect on the direction of Kao Fong i.e., Kao Fong and Onyx Healthcare go up and down completely randomly.

Pair Corralation between Kao Fong and Onyx Healthcare

Assuming the 90 days trading horizon Kao Fong Machinery is expected to generate 2.59 times more return on investment than Onyx Healthcare. However, Kao Fong is 2.59 times more volatile than Onyx Healthcare. It trades about 0.1 of its potential returns per unit of risk. Onyx Healthcare is currently generating about -0.06 per unit of risk. If you would invest  3,780  in Kao Fong Machinery on October 11, 2024 and sell it today you would earn a total of  950.00  from holding Kao Fong Machinery or generate 25.13% 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.  Onyx Healthcare

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.

Onyx Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Onyx 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.

Pair Trading with Kao Fong and Onyx Healthcare

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

The idea behind Kao Fong Machinery and Onyx Healthcare 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.