Correlation Between Sichuan Hebang and Kuangda Technology

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Can any of the company-specific risk be diversified away by investing in both Sichuan Hebang and Kuangda 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 Sichuan Hebang and Kuangda Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sichuan Hebang Biotechnology and Kuangda Technology Group, you can compare the effects of market volatilities on Sichuan Hebang and Kuangda 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 Sichuan Hebang with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sichuan Hebang and Kuangda Technology.

Diversification Opportunities for Sichuan Hebang and Kuangda Technology

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Sichuan and Kuangda is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sichuan Hebang Biotechnology and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Sichuan Hebang 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 Sichuan Hebang Biotechnology are associated (or correlated) with Kuangda Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuangda Technology has no effect on the direction of Sichuan Hebang i.e., Sichuan Hebang and Kuangda Technology go up and down completely randomly.

Pair Corralation between Sichuan Hebang and Kuangda Technology

Assuming the 90 days trading horizon Sichuan Hebang Biotechnology is expected to generate 0.83 times more return on investment than Kuangda Technology. However, Sichuan Hebang Biotechnology is 1.21 times less risky than Kuangda Technology. It trades about -0.11 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about -0.3 per unit of risk. If you would invest  210.00  in Sichuan Hebang Biotechnology on October 5, 2024 and sell it today you would lose (15.00) from holding Sichuan Hebang Biotechnology or give up 7.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Sichuan Hebang Biotechnology  vs.  Kuangda Technology Group

 Performance 
       Timeline  
Sichuan Hebang Biote 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Sichuan Hebang Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Kuangda Technology 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Kuangda Technology Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Kuangda Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sichuan Hebang and Kuangda Technology Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sichuan Hebang and Kuangda Technology

The main advantage of trading using opposite Sichuan Hebang and Kuangda Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sichuan Hebang position performs unexpectedly, Kuangda 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 Kuangda Technology will offset losses from the drop in Kuangda Technology's long position.
The idea behind Sichuan Hebang Biotechnology and Kuangda Technology Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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