Correlation Between Kunyue Development and Oceanic Beverages

Can any of the company-specific risk be diversified away by investing in both Kunyue Development and Oceanic Beverages 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 Kunyue Development and Oceanic Beverages into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kunyue Development Co and Oceanic Beverages Co, you can compare the effects of market volatilities on Kunyue Development and Oceanic Beverages 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 Kunyue Development with a short position of Oceanic Beverages. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kunyue Development and Oceanic Beverages.

Diversification Opportunities for Kunyue Development and Oceanic Beverages

0.36

Correlation Coefficient

Kunyue Development  Oceanic Beverages

Weak diversification

The 3 months correlation between Kunyue and Oceanic is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Kunyue Development Co and Oceanic Beverages Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oceanic Beverages and Kunyue Development 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 Kunyue Development Co are associated (or correlated) with Oceanic Beverages. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oceanic Beverages has no effect on the direction of Kunyue Development i.e., Kunyue Development and Oceanic Beverages go up and down completely randomly.

Pair Corralation between Kunyue Development and Oceanic Beverages

Assuming the 90 days trading horizon Kunyue Development Co is expected to generate 1.05 times more return on investment than Oceanic Beverages. However, Kunyue Development is 1.05 times more volatile than Oceanic Beverages Co. It trades about 0.1 of its potential returns per unit of risk. Oceanic Beverages Co is currently generating about 0.08 per unit of risk. If you would invest  1,491  in Kunyue Development Co on October 4, 2024 and sell it today you would earn a total of  2,734  from holding Kunyue Development Co or generate 183.37% return on investment over 90 days.

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

Kunyue Development Co  vs.  Oceanic Beverages Co

Kunyue Development

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kunyue Development Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kunyue Development may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Oceanic Beverages

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oceanic Beverages Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Oceanic Beverages showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kunyue Development and Oceanic Beverages

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

The idea behind Kunyue Development Co and Oceanic Beverages 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.