Correlation Between Chien Kuo and Kung Sing

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

Diversification Opportunities for Chien Kuo and Kung Sing

-0.8

Correlation Coefficient

Chien Kuo  Kung Sing

Pay attention - limited upside

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

Pair Corralation between Chien Kuo and Kung Sing

Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.98 times more return on investment than Kung Sing. However, Chien Kuo Construction is 1.02 times less risky than Kung Sing. It trades about 0.09 of its potential returns per unit of risk. Kung Sing Engineering is currently generating about 0.05 per unit of risk. If you would invest  1,135  in Chien Kuo Construction on October 4, 2024 and sell it today you would earn a total of  1,420  from holding Chien Kuo Construction or generate 125.11% return on investment over 90 days.

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

Chien Kuo Construction  vs.  Kung Sing Engineering

Chien Kuo Construction

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chien Kuo Construction are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chien Kuo showed solid returns over the last few months and may actually be approaching a breakup point.

Kung Sing Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kung Sing Engineering 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 February 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 Kung Sing

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

The idea behind Chien Kuo Construction and Kung Sing Engineering 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.