Correlation Between K Way and Roo Hsing

Can any of the company-specific risk be diversified away by investing in both K Way and Roo Hsing 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 K Way and Roo Hsing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between K Way Information and Roo Hsing Co, you can compare the effects of market volatilities on K Way and Roo Hsing 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 K Way with a short position of Roo Hsing. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Way and Roo Hsing.

Diversification Opportunities for K Way and Roo Hsing

0.82

Correlation Coefficient

K Way  Roo Hsing

Very poor diversification

The 3 months correlation between 5201 and Roo is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding K Way Information and Roo Hsing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roo Hsing and K Way 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 K Way Information are associated (or correlated) with Roo Hsing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roo Hsing has no effect on the direction of K Way i.e., K Way and Roo Hsing go up and down completely randomly.

Pair Corralation between K Way and Roo Hsing

Assuming the 90 days trading horizon K Way Information is expected to generate 1.13 times more return on investment than Roo Hsing. However, K Way is 1.13 times more volatile than Roo Hsing Co. It trades about 0.22 of its potential returns per unit of risk. Roo Hsing Co is currently generating about 0.2 per unit of risk. If you would invest  2,830  in K Way Information on December 21, 2024 and sell it today you would earn a total of  910.00  from holding K Way Information or generate 32.16% return on investment over 90 days.

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

K Way Information  vs.  Roo Hsing Co

K Way Information

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in K Way Information are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, K Way showed solid returns over the last few months and may actually be approaching a breakup point.

Roo Hsing

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Roo Hsing Co are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Roo Hsing showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K Way and Roo Hsing

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

The idea behind K Way Information and Roo Hsing 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.

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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.