Correlation Between China Asset and Kangxin New

Can any of the company-specific risk be diversified away by investing in both China Asset and Kangxin New 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 China Asset and Kangxin New into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Asset Management and Kangxin New Materials, you can compare the effects of market volatilities on China Asset and Kangxin New 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 China Asset with a short position of Kangxin New. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Asset and Kangxin New.

Diversification Opportunities for China Asset and Kangxin New

-0.7

Correlation Coefficient

China Asset  Kangxin New

Excellent diversification

The 3 months correlation between China and Kangxin is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Asset Management and Kangxin New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangxin New Materials and China Asset 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 China Asset Management are associated (or correlated) with Kangxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangxin New Materials has no effect on the direction of China Asset i.e., China Asset and Kangxin New go up and down completely randomly.

Pair Corralation between China Asset and Kangxin New

Assuming the 90 days trading horizon China Asset Management is expected to generate 0.4 times more return on investment than Kangxin New. However, China Asset Management is 2.48 times less risky than Kangxin New. It trades about 0.24 of its potential returns per unit of risk. Kangxin New Materials is currently generating about -0.01 per unit of risk. If you would invest  317.00  in China Asset Management on December 2, 2024 and sell it today you would earn a total of  65.00  from holding China Asset Management or generate 20.5% return on investment over 90 days.

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

China Asset Management  vs.  Kangxin New Materials

China Asset Management

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in China Asset Management are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Asset sustained solid returns over the last few months and may actually be approaching a breakup point.

Kangxin New Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kangxin New Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Kangxin New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with China Asset and Kangxin New

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

The idea behind China Asset Management and Kangxin New Materials 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.