Correlation Between New China and KSEC Intelligent

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

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

Diversification Opportunities for New China and KSEC Intelligent

0.82

Correlation Coefficient

New China  KSEC Intelligent

Very poor diversification

The 3 months correlation between New and KSEC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding New China Life and KSEC Intelligent Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSEC Intelligent Tec and New China 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 New China Life are associated (or correlated) with KSEC Intelligent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSEC Intelligent Tec has no effect on the direction of New China i.e., New China and KSEC Intelligent go up and down completely randomly.

Pair Corralation between New China and KSEC Intelligent

Assuming the 90 days trading horizon New China Life is expected to generate 0.61 times more return on investment than KSEC Intelligent. However, New China Life is 1.64 times less risky than KSEC Intelligent. It trades about 0.06 of its potential returns per unit of risk. KSEC Intelligent Technology is currently generating about 0.02 per unit of risk. If you would invest  3,117  in New China Life on September 26, 2024 and sell it today you would earn a total of  1,992  from holding New China Life or generate 63.91% return on investment over 90 days.

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

New China Life  vs.  KSEC Intelligent Technology

New China Life

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New China Life are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, New China sustained solid returns over the last few months and may actually be approaching a breakup point.

KSEC Intelligent Tec

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KSEC Intelligent Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KSEC Intelligent sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with New China and KSEC Intelligent

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

The idea behind New China Life and KSEC Intelligent 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.