Correlation Between Kangxin New and China Asset

Can any of the company-specific risk be diversified away by investing in both Kangxin New and China Asset 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 Kangxin New and China Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kangxin New Materials and China Asset Management, you can compare the effects of market volatilities on Kangxin New and China Asset 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 Kangxin New with a short position of China Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kangxin New and China Asset.

Diversification Opportunities for Kangxin New and China Asset

-0.43

Correlation Coefficient

Kangxin New  China Asset

Very good diversification

The 3 months correlation between Kangxin and China is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Kangxin New Materials and China Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Asset Management and Kangxin New 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 Kangxin New Materials are associated (or correlated) with China Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Asset Management has no effect on the direction of Kangxin New i.e., Kangxin New and China Asset go up and down completely randomly.

Pair Corralation between Kangxin New and China Asset

Assuming the 90 days trading horizon Kangxin New Materials is expected to generate 4.21 times more return on investment than China Asset. However, Kangxin New is 4.21 times more volatile than China Asset Management. It trades about 0.32 of its potential returns per unit of risk. China Asset Management is currently generating about 0.01 per unit of risk. If you would invest  139.00  in Kangxin New Materials on September 4, 2024 and sell it today you would earn a total of  133.00  from holding Kangxin New Materials or generate 95.68% return on investment over 90 days.

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

Kangxin New Materials  vs.  China Asset Management

Kangxin New Materials

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kangxin New sustained solid returns over the last few months and may actually be approaching a breakup point.

China Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Kangxin New and China Asset

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

The idea behind Kangxin New Materials and China Asset Management 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.