Correlation Between Kunyue Development and Ruentex Engineering

Can any of the company-specific risk be diversified away by investing in both Kunyue Development and Ruentex Engineering 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 Ruentex Engineering 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 Ruentex Engineering Construction, you can compare the effects of market volatilities on Kunyue Development and Ruentex Engineering 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 Ruentex Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kunyue Development and Ruentex Engineering.

Diversification Opportunities for Kunyue Development and Ruentex Engineering

0.8

Correlation Coefficient

Kunyue Development  Ruentex Engineering

Very poor diversification

The 3 months correlation between Kunyue and Ruentex is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Kunyue Development Co and Ruentex Engineering Constructi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ruentex Engineering 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 Ruentex Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ruentex Engineering has no effect on the direction of Kunyue Development i.e., Kunyue Development and Ruentex Engineering go up and down completely randomly.

Pair Corralation between Kunyue Development and Ruentex Engineering

Assuming the 90 days trading horizon Kunyue Development Co is expected to under-perform the Ruentex Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Kunyue Development Co is 1.19 times less risky than Ruentex Engineering. The stock trades about -0.03 of its potential returns per unit of risk. The Ruentex Engineering Construction is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,850  in Ruentex Engineering Construction on October 22, 2024 and sell it today you would earn a total of  650.00  from holding Ruentex Engineering Construction or generate 4.38% return on investment over 90 days.

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

Kunyue Development Co  vs.  Ruentex Engineering Constructi

Kunyue Development

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kunyue Development Co are ranked lower than 3 (%) 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.

Ruentex Engineering

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ruentex Engineering Construction are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Ruentex Engineering may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Kunyue Development and Ruentex Engineering

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

The idea behind Kunyue Development Co and Ruentex Engineering Construction 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.