Correlation Between Chong Hong and Kunyue Development

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Can any of the company-specific risk be diversified away by investing in both Chong Hong and Kunyue 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 Chong Hong and Kunyue Development into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chong Hong Construction and Kunyue Development Co, you can compare the effects of market volatilities on Chong Hong and Kunyue 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 Chong Hong with a short position of Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chong Hong and Kunyue Development.

Diversification Opportunities for Chong Hong and Kunyue Development

ChongKunyueDiversified AwayChongKunyueDiversified Away100%
-0.04
  Correlation Coefficient

Good diversification

The 3 months correlation between Chong and Kunyue is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Chong Hong Construction and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development and Chong Hong 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 Chong Hong Construction are associated (or correlated) with Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Chong Hong i.e., Chong Hong and Kunyue Development go up and down completely randomly.

Pair Corralation between Chong Hong and Kunyue Development

Assuming the 90 days trading horizon Chong Hong Construction is expected to under-perform the Kunyue Development. But the stock apears to be less risky and, when comparing its historical volatility, Chong Hong Construction is 1.15 times less risky than Kunyue Development. The stock trades about -0.12 of its potential returns per unit of risk. The Kunyue Development Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,915  in Kunyue Development Co on October 6, 2024 and sell it today you would earn a total of  370.00  from holding Kunyue Development Co or generate 9.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy98.44%
ValuesDaily Returns

Chong Hong Construction  vs.  Kunyue Development Co

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-15-10-50510
JavaScript chart by amCharts 3.21.155534 5206
       Timeline  
Chong Hong Construction 

Risk-Adjusted Performance

0 of 100

 
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Very Weak
Over the last 90 days Chong Hong Construction 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan80859095100
Kunyue Development 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Kunyue Development Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kunyue Development may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan343638404244

Chong Hong and Kunyue Development Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.26-2.44-1.62-0.80.00.731.462.192.92 0.060.070.080.090.100.11
JavaScript chart by amCharts 3.21.155534 5206
       Returns  

Pair Trading with Chong Hong and Kunyue Development

The main advantage of trading using opposite Chong Hong and Kunyue Development positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chong Hong position performs unexpectedly, Kunyue 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 Kunyue Development will offset losses from the drop in Kunyue Development's long position.
The idea behind Chong Hong Construction and Kunyue 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.
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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