Correlation Between K Way and Sunmax Biotechnology

Can any of the company-specific risk be diversified away by investing in both K Way and Sunmax 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 K Way and Sunmax Biotechnology 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 Sunmax Biotechnology Co, you can compare the effects of market volatilities on K Way and Sunmax 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 K Way with a short position of Sunmax Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of K Way and Sunmax Biotechnology.

Diversification Opportunities for K Way and Sunmax Biotechnology

0.66

Correlation Coefficient

K Way  Sunmax Biotechnology

Poor diversification

The 3 months correlation between 5201 and Sunmax is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding K Way Information and Sunmax Biotechnology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunmax Biotechnology 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 Sunmax Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunmax Biotechnology has no effect on the direction of K Way i.e., K Way and Sunmax Biotechnology go up and down completely randomly.

Pair Corralation between K Way and Sunmax Biotechnology

Assuming the 90 days trading horizon K Way is expected to generate 1.08 times less return on investment than Sunmax Biotechnology. In addition to that, K Way is 1.26 times more volatile than Sunmax Biotechnology Co. It trades about 0.22 of its total potential returns per unit of risk. Sunmax Biotechnology Co is currently generating about 0.3 per unit of volatility. If you would invest  27,700  in Sunmax Biotechnology Co on December 21, 2024 and sell it today you would earn a total of  10,000  from holding Sunmax Biotechnology Co or generate 36.1% return on investment over 90 days.

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

K Way Information  vs.  Sunmax Biotechnology 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.

Sunmax Biotechnology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunmax Biotechnology Co are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Sunmax Biotechnology showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with K Way and Sunmax Biotechnology

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

The idea behind K Way Information and Sunmax 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.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.