Correlation Between Shining Building and Kindom Construction

Can any of the company-specific risk be diversified away by investing in both Shining Building and Kindom Construction 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 Shining Building and Kindom Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shining Building Business and Kindom Construction Corp, you can compare the effects of market volatilities on Shining Building and Kindom Construction 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 Shining Building with a short position of Kindom Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shining Building and Kindom Construction.

Diversification Opportunities for Shining Building and Kindom Construction

0.72

Correlation Coefficient

Shining Building  Kindom Construction

Poor diversification

The 3 months correlation between Shining and Kindom is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Shining Building Business and Kindom Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindom Construction Corp and Shining Building 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 Shining Building Business are associated (or correlated) with Kindom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindom Construction Corp has no effect on the direction of Shining Building i.e., Shining Building and Kindom Construction go up and down completely randomly.

Pair Corralation between Shining Building and Kindom Construction

Assuming the 90 days trading horizon Shining Building Business is expected to under-perform the Kindom Construction. In addition to that, Shining Building is 1.29 times more volatile than Kindom Construction Corp. It trades about -0.04 of its total potential returns per unit of risk. Kindom Construction Corp is currently generating about 0.03 per unit of volatility. If you would invest  4,960  in Kindom Construction Corp on October 9, 2024 and sell it today you would earn a total of  110.00  from holding Kindom Construction Corp or generate 2.22% return on investment over 90 days.

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

Shining Building Business  vs.  Kindom Construction Corp

Shining Building Business

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kindom Construction Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kindom Construction Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kindom Construction may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Shining Building and Kindom Construction

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

The idea behind Shining Building Business and Kindom Construction Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.