Correlation Between A Zenith and Kangxin New

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

Diversification Opportunities for A Zenith and Kangxin New

603389KangxinDiversified Away603389KangxinDiversified Away100%
0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between 603389 and Kangxin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding A Zenith Home Furnishings and Kangxin New Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kangxin New Materials and A Zenith 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 A Zenith Home Furnishings are associated (or correlated) with Kangxin New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kangxin New Materials has no effect on the direction of A Zenith i.e., A Zenith and Kangxin New go up and down completely randomly.

Pair Corralation between A Zenith and Kangxin New

Assuming the 90 days trading horizon A Zenith Home Furnishings is expected to under-perform the Kangxin New. In addition to that, A Zenith is 1.28 times more volatile than Kangxin New Materials. It trades about -0.03 of its total potential returns per unit of risk. Kangxin New Materials is currently generating about 0.04 per unit of volatility. If you would invest  186.00  in Kangxin New Materials on October 10, 2024 and sell it today you would earn a total of  10.00  from holding Kangxin New Materials or generate 5.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

A Zenith Home Furnishings  vs.  Kangxin New Materials

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -100102030405060
JavaScript chart by amCharts 3.21.15603389 600076
       Timeline  
A Zenith Home 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days A Zenith Home Furnishings 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan5.566.577.588.599.5
Kangxin New Materials 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Kangxin New Materials are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kangxin New may actually be approaching a critical reversion point that can send shares even higher in February 2025.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1.822.22.42.62.83

A Zenith and Kangxin New Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.99-5.98-3.98-1.97-0.03221.873.85.737.679.6 0.0160.0180.0200.0220.024
JavaScript chart by amCharts 3.21.15603389 600076
       Returns  

Pair Trading with A Zenith and Kangxin New

The main advantage of trading using opposite A Zenith and Kangxin New positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A Zenith position performs unexpectedly, Kangxin New 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 Kangxin New will offset losses from the drop in Kangxin New's long position.
The idea behind A Zenith Home Furnishings and Kangxin New Materials 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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