Correlation Between Kunwu Jiuding and LianChuang Electronic

Can any of the company-specific risk be diversified away by investing in both Kunwu Jiuding and LianChuang Electronic 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 Kunwu Jiuding and LianChuang Electronic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kunwu Jiuding Investment and LianChuang Electronic Technology, you can compare the effects of market volatilities on Kunwu Jiuding and LianChuang Electronic 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 Kunwu Jiuding with a short position of LianChuang Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kunwu Jiuding and LianChuang Electronic.

Diversification Opportunities for Kunwu Jiuding and LianChuang Electronic

0.41

Correlation Coefficient

Kunwu Jiuding  LianChuang Electronic

Very weak diversification

The 3 months correlation between Kunwu and LianChuang is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kunwu Jiuding Investment and LianChuang Electronic Technolo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LianChuang Electronic and Kunwu Jiuding 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 Kunwu Jiuding Investment are associated (or correlated) with LianChuang Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LianChuang Electronic has no effect on the direction of Kunwu Jiuding i.e., Kunwu Jiuding and LianChuang Electronic go up and down completely randomly.

Pair Corralation between Kunwu Jiuding and LianChuang Electronic

Assuming the 90 days trading horizon Kunwu Jiuding Investment is expected to generate 0.99 times more return on investment than LianChuang Electronic. However, Kunwu Jiuding Investment is 1.01 times less risky than LianChuang Electronic. It trades about 0.01 of its potential returns per unit of risk. LianChuang Electronic Technology is currently generating about 0.0 per unit of risk. If you would invest  1,634  in Kunwu Jiuding Investment on October 4, 2024 and sell it today you would lose (247.00) from holding Kunwu Jiuding Investment or give up 15.12% of portfolio value over 90 days.

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

Kunwu Jiuding Investment  vs.  LianChuang Electronic Technolo

Kunwu Jiuding Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kunwu Jiuding Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

LianChuang Electronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LianChuang Electronic Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, LianChuang Electronic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kunwu Jiuding and LianChuang Electronic

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

The idea behind Kunwu Jiuding Investment and LianChuang Electronic Technology 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 Transaction History module to view history of all your transactions and understand their impact on performance.