Correlation Between Shanghai Jinfeng and Kuang Chi

Can any of the company-specific risk be diversified away by investing in both Shanghai Jinfeng and Kuang Chi 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 Shanghai Jinfeng and Kuang Chi into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shanghai Jinfeng Wine and Kuang Chi Technologies, you can compare the effects of market volatilities on Shanghai Jinfeng and Kuang Chi 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 Shanghai Jinfeng with a short position of Kuang Chi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shanghai Jinfeng and Kuang Chi.

Diversification Opportunities for Shanghai Jinfeng and Kuang Chi

0.34

Correlation Coefficient

Shanghai Jinfeng  Kuang Chi

Weak diversification

The 3 months correlation between Shanghai and Kuang is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Jinfeng Wine and Kuang Chi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuang Chi Technologies and Shanghai Jinfeng 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 Shanghai Jinfeng Wine are associated (or correlated) with Kuang Chi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuang Chi Technologies has no effect on the direction of Shanghai Jinfeng i.e., Shanghai Jinfeng and Kuang Chi go up and down completely randomly.

Pair Corralation between Shanghai Jinfeng and Kuang Chi

Assuming the 90 days trading horizon Shanghai Jinfeng Wine is expected to under-perform the Kuang Chi. But the stock apears to be less risky and, when comparing its historical volatility, Shanghai Jinfeng Wine is 1.32 times less risky than Kuang Chi. The stock trades about -0.01 of its potential returns per unit of risk. The Kuang Chi Technologies is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,726  in Kuang Chi Technologies on October 8, 2024 and sell it today you would earn a total of  1,320  from holding Kuang Chi Technologies or generate 48.42% return on investment over 90 days.

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

Shanghai Jinfeng Wine  vs.  Kuang Chi Technologies

Shanghai Jinfeng Wine

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kuang Chi Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Chi Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kuang Chi sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Shanghai Jinfeng and Kuang Chi

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

The idea behind Shanghai Jinfeng Wine and Kuang Chi Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.