Correlation Between China Enterprise and INKON Life

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

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

Diversification Opportunities for China Enterprise and INKON Life

0.76

Correlation Coefficient

China Enterprise  INKON Life

Poor diversification

The 3 months correlation between China and INKON is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding China Enterprise Co and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and China Enterprise 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 China Enterprise Co are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of China Enterprise i.e., China Enterprise and INKON Life go up and down completely randomly.

Pair Corralation between China Enterprise and INKON Life

Assuming the 90 days trading horizon China Enterprise Co is expected to under-perform the INKON Life. But the stock apears to be less risky and, when comparing its historical volatility, China Enterprise Co is 1.04 times less risky than INKON Life. The stock trades about 0.0 of its potential returns per unit of risk. The INKON Life Technology is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,055  in INKON Life Technology on September 28, 2024 and sell it today you would lose (138.00) from holding INKON Life Technology or give up 13.08% of portfolio value over 90 days.

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

China Enterprise Co  vs.  INKON Life Technology

China Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Enterprise 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

INKON Life Technology

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with China Enterprise and INKON Life

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

The idea behind China Enterprise Co and INKON Life 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.