Correlation Between WINSON Machinery and Li Kang

Can any of the company-specific risk be diversified away by investing in both WINSON Machinery and Li Kang 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 WINSON Machinery and Li Kang into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WINSON Machinery Co and Li Kang Biomedical, you can compare the effects of market volatilities on WINSON Machinery and Li Kang 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 WINSON Machinery with a short position of Li Kang. Check out your portfolio center. Please also check ongoing floating volatility patterns of WINSON Machinery and Li Kang.

Diversification Opportunities for WINSON Machinery and Li Kang

0.48

Correlation Coefficient

WINSON Machinery  Li Kang

Very weak diversification

The 3 months correlation between WINSON and 6242 is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding WINSON Machinery Co and Li Kang Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li Kang Biomedical and WINSON Machinery 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 WINSON Machinery Co are associated (or correlated) with Li Kang. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li Kang Biomedical has no effect on the direction of WINSON Machinery i.e., WINSON Machinery and Li Kang go up and down completely randomly.

Pair Corralation between WINSON Machinery and Li Kang

Assuming the 90 days trading horizon WINSON Machinery Co is expected to generate 6.55 times more return on investment than Li Kang. However, WINSON Machinery is 6.55 times more volatile than Li Kang Biomedical. It trades about 0.03 of its potential returns per unit of risk. Li Kang Biomedical is currently generating about 0.01 per unit of risk. If you would invest  1,642  in WINSON Machinery Co on October 2, 2024 and sell it today you would earn a total of  293.00  from holding WINSON Machinery Co or generate 17.84% return on investment over 90 days.

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

WINSON Machinery Co  vs.  Li Kang Biomedical

WINSON Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WINSON Machinery 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.

Li Kang Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Kang Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Li Kang is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with WINSON Machinery and Li Kang

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

The idea behind WINSON Machinery Co and Li Kang Biomedical 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.