Correlation Between Kung Sing and Rich Development

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

Diversification Opportunities for Kung Sing and Rich Development

0.59

Correlation Coefficient

Kung Sing  Rich Development

Very weak diversification

The 3 months correlation between Kung and Rich is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Kung Sing Engineering and Rich Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rich Development 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 Rich Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rich Development has no effect on the direction of Kung Sing i.e., Kung Sing and Rich Development go up and down completely randomly.

Pair Corralation between Kung Sing and Rich Development

Assuming the 90 days trading horizon Kung Sing Engineering is expected to under-perform the Rich Development. In addition to that, Kung Sing is 1.58 times more volatile than Rich Development Co. It trades about -0.13 of its total potential returns per unit of risk. Rich Development Co is currently generating about -0.07 per unit of volatility. If you would invest  996.00  in Rich Development Co on September 23, 2024 and sell it today you would lose (15.00) from holding Rich Development Co or give up 1.51% of portfolio value over 90 days.

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

Kung Sing Engineering  vs.  Rich Development Co

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 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.

Rich Development

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rich Development Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Rich Development is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Kung Sing and Rich Development

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

The idea behind Kung Sing Engineering and Rich Development Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.