Correlation Between Chien Kuo and Golden Biotechnology

Can any of the company-specific risk be diversified away by investing in both Chien Kuo and Golden 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 Chien Kuo and Golden Biotechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chien Kuo Construction and Golden Biotechnology, you can compare the effects of market volatilities on Chien Kuo and Golden 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 Chien Kuo with a short position of Golden Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chien Kuo and Golden Biotechnology.

Diversification Opportunities for Chien Kuo and Golden Biotechnology

-0.49

Correlation Coefficient

Chien Kuo  Golden Biotechnology

Very good diversification

The 3 months correlation between Chien and Golden is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and Golden Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Biotechnology and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with Golden Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Biotechnology has no effect on the direction of Chien Kuo i.e., Chien Kuo and Golden Biotechnology go up and down completely randomly.

Pair Corralation between Chien Kuo and Golden Biotechnology

Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.8 times more return on investment than Golden Biotechnology. However, Chien Kuo Construction is 1.26 times less risky than Golden Biotechnology. It trades about 0.0 of its potential returns per unit of risk. Golden Biotechnology is currently generating about -0.19 per unit of risk. If you would invest  2,710  in Chien Kuo Construction on September 24, 2024 and sell it today you would lose (10.00) from holding Chien Kuo Construction or give up 0.37% of portfolio value over 90 days.

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

Chien Kuo Construction  vs.  Golden Biotechnology

Chien Kuo Construction

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Golden Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Chien Kuo and Golden Biotechnology

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

The idea behind Chien Kuo Construction and Golden Biotechnology 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.