Correlation Between Grand Fortune and Kworld Computer

Can any of the company-specific risk be diversified away by investing in both Grand Fortune and Kworld Computer 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 Grand Fortune and Kworld Computer into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grand Fortune Securities and Kworld Computer Co, you can compare the effects of market volatilities on Grand Fortune and Kworld Computer 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 Grand Fortune with a short position of Kworld Computer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grand Fortune and Kworld Computer.

Diversification Opportunities for Grand Fortune and Kworld Computer

0.75

Correlation Coefficient

Grand Fortune  Kworld Computer

Poor diversification

The 3 months correlation between Grand and Kworld is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grand Fortune Securities and Kworld Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kworld Computer and Grand Fortune 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 Grand Fortune Securities are associated (or correlated) with Kworld Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kworld Computer has no effect on the direction of Grand Fortune i.e., Grand Fortune and Kworld Computer go up and down completely randomly.

Pair Corralation between Grand Fortune and Kworld Computer

Assuming the 90 days trading horizon Grand Fortune is expected to generate 3.78 times less return on investment than Kworld Computer. But when comparing it to its historical volatility, Grand Fortune Securities is 2.3 times less risky than Kworld Computer. It trades about 0.05 of its potential returns per unit of risk. Kworld Computer Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,325  in Kworld Computer Co on September 26, 2024 and sell it today you would earn a total of  2,255  from holding Kworld Computer Co or generate 170.19% return on investment over 90 days.

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

Grand Fortune Securities  vs.  Kworld Computer Co

Grand Fortune Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grand Fortune Securities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Kworld Computer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kworld Computer Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Kworld Computer is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Grand Fortune and Kworld Computer

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

The idea behind Grand Fortune Securities and Kworld Computer 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.