Correlation Between Chinese Universe and Kangyue Technology

Can any of the company-specific risk be diversified away by investing in both Chinese Universe and Kangyue Technology 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 Chinese Universe and Kangyue Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chinese Universe Publishing and Kangyue Technology Co, you can compare the effects of market volatilities on Chinese Universe and Kangyue Technology 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 Chinese Universe with a short position of Kangyue Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chinese Universe and Kangyue Technology.

Diversification Opportunities for Chinese Universe and Kangyue Technology

0.54

Correlation Coefficient

Chinese Universe  Kangyue Technology

Very weak diversification

The 3 months correlation between Chinese and Kangyue is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chinese Universe Publishing and Kangyue Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangyue Technology and Chinese Universe 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 Chinese Universe Publishing are associated (or correlated) with Kangyue Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangyue Technology has no effect on the direction of Chinese Universe i.e., Chinese Universe and Kangyue Technology go up and down completely randomly.

Pair Corralation between Chinese Universe and Kangyue Technology

Assuming the 90 days trading horizon Chinese Universe Publishing is expected to generate 0.4 times more return on investment than Kangyue Technology. However, Chinese Universe Publishing is 2.51 times less risky than Kangyue Technology. It trades about -0.36 of its potential returns per unit of risk. Kangyue Technology Co is currently generating about -0.15 per unit of risk. If you would invest  1,304  in Chinese Universe Publishing on October 25, 2024 and sell it today you would lose (147.00) from holding Chinese Universe Publishing or give up 11.27% of portfolio value over 90 days.

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

Chinese Universe Publishing  vs.  Kangyue Technology Co

Chinese Universe Pub

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chinese Universe Publishing 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.

Kangyue Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kangyue Technology Co 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.

Pair Trading with Chinese Universe and Kangyue Technology

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

The idea behind Chinese Universe Publishing and Kangyue Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.