Correlation Between Kangxin New and Zhejiang Daily

Can any of the company-specific risk be diversified away by investing in both Kangxin New and Zhejiang Daily 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 Zhejiang Daily 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 Zhejiang Daily Media, you can compare the effects of market volatilities on Kangxin New and Zhejiang Daily 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 Zhejiang Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kangxin New and Zhejiang Daily.

Diversification Opportunities for Kangxin New and Zhejiang Daily

0.83

Correlation Coefficient

Kangxin New  Zhejiang Daily

Very poor diversification

The 3 months correlation between Kangxin and Zhejiang is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Kangxin New Materials and Zhejiang Daily Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhejiang Daily Media 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 Zhejiang Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhejiang Daily Media has no effect on the direction of Kangxin New i.e., Kangxin New and Zhejiang Daily go up and down completely randomly.

Pair Corralation between Kangxin New and Zhejiang Daily

Assuming the 90 days trading horizon Kangxin New Materials is expected to generate 1.28 times more return on investment than Zhejiang Daily. However, Kangxin New is 1.28 times more volatile than Zhejiang Daily Media. It trades about 0.13 of its potential returns per unit of risk. Zhejiang Daily Media is currently generating about 0.11 per unit of risk. If you would invest  171.00  in Kangxin New Materials on September 26, 2024 and sell it today you would earn a total of  51.00  from holding Kangxin New Materials or generate 29.82% return on investment over 90 days.

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

Kangxin New Materials  vs.  Zhejiang Daily Media

Kangxin New Materials

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 10 (%) 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.

Zhejiang Daily Media

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zhejiang Daily Media are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhejiang Daily sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kangxin New and Zhejiang Daily

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

The idea behind Kangxin New Materials and Zhejiang Daily Media 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.