Correlation Between Kung Sing and Cheng Uei

Can any of the company-specific risk be diversified away by investing in both Kung Sing and Cheng Uei 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 Kung Sing and Cheng Uei into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kung Sing Engineering and Cheng Uei Precision, you can compare the effects of market volatilities on Kung Sing and Cheng Uei 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 Kung Sing with a short position of Cheng Uei. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kung Sing and Cheng Uei.

Diversification Opportunities for Kung Sing and Cheng Uei

-0.65

Correlation Coefficient

Kung Sing  Cheng Uei

Excellent diversification

The 3 months correlation between Kung and Cheng is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Kung Sing Engineering and Cheng Uei Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheng Uei Precision and Kung Sing 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 Kung Sing Engineering are associated (or correlated) with Cheng Uei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheng Uei Precision has no effect on the direction of Kung Sing i.e., Kung Sing and Cheng Uei go up and down completely randomly.

Pair Corralation between Kung Sing and Cheng Uei

Assuming the 90 days trading horizon Kung Sing Engineering is expected to under-perform the Cheng Uei. But the stock apears to be less risky and, when comparing its historical volatility, Kung Sing Engineering is 1.52 times less risky than Cheng Uei. The stock trades about -0.22 of its potential returns per unit of risk. The Cheng Uei Precision is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  7,520  in Cheng Uei Precision on October 8, 2024 and sell it today you would lose (490.00) from holding Cheng Uei Precision or give up 6.52% of portfolio value over 90 days.

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

Kung Sing Engineering  vs.  Cheng Uei Precision

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.

Cheng Uei Precision

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cheng Uei Precision are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Cheng Uei showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kung Sing and Cheng Uei

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

The idea behind Kung Sing Engineering and Cheng Uei Precision 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.