Correlation Between Kunyue Development and Tacheng Real

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

Diversification Opportunities for Kunyue Development and Tacheng Real

0.79

Correlation Coefficient

Kunyue Development  Tacheng Real

Poor diversification

The 3 months correlation between Kunyue and Tacheng is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Kunyue Development Co and Tacheng Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tacheng Real Estate 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 Tacheng Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tacheng Real Estate has no effect on the direction of Kunyue Development i.e., Kunyue Development and Tacheng Real go up and down completely randomly.

Pair Corralation between Kunyue Development and Tacheng Real

Assuming the 90 days trading horizon Kunyue Development Co is expected to under-perform the Tacheng Real. But the stock apears to be less risky and, when comparing its historical volatility, Kunyue Development Co is 1.28 times less risky than Tacheng Real. The stock trades about -0.07 of its potential returns per unit of risk. The Tacheng Real Estate is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  4,515  in Tacheng Real Estate on September 19, 2024 and sell it today you would lose (430.00) from holding Tacheng Real Estate or give up 9.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Kunyue Development Co  vs.  Tacheng Real Estate

Kunyue Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kunyue Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Tacheng Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tacheng Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Kunyue Development and Tacheng Real

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

The idea behind Kunyue Development Co and Tacheng Real Estate 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.