Correlation Between Chahua Modern and Kuangda Technology

Can any of the company-specific risk be diversified away by investing in both Chahua Modern 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 Chahua Modern and Kuangda Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chahua Modern Housewares and Kuangda Technology Group, you can compare the effects of market volatilities on Chahua Modern 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 Chahua Modern with a short position of Kuangda Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chahua Modern and Kuangda Technology.

Diversification Opportunities for Chahua Modern and Kuangda Technology

-0.12

Correlation Coefficient

Chahua Modern  Kuangda Technology

Good diversification

The 3 months correlation between Chahua and Kuangda is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Chahua Modern Housewares and Kuangda Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuangda Technology and Chahua Modern 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 Chahua Modern Housewares 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 Chahua Modern i.e., Chahua Modern and Kuangda Technology go up and down completely randomly.

Pair Corralation between Chahua Modern and Kuangda Technology

Assuming the 90 days trading horizon Chahua Modern Housewares is expected to generate 1.44 times more return on investment than Kuangda Technology. However, Chahua Modern is 1.44 times more volatile than Kuangda Technology Group. It trades about 0.07 of its potential returns per unit of risk. Kuangda Technology Group is currently generating about 0.01 per unit of risk. If you would invest  832.00  in Chahua Modern Housewares on October 25, 2024 and sell it today you would earn a total of  1,230  from holding Chahua Modern Housewares or generate 147.84% return on investment over 90 days.

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

Chahua Modern Housewares  vs.  Kuangda Technology Group

Chahua Modern Housewares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chahua Modern Housewares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chahua Modern may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kuangda Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuangda Technology Group 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.

Pair Trading with Chahua Modern and Kuangda Technology

The main advantage of trading using opposite Chahua Modern and Kuangda Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chahua Modern 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 Chahua Modern Housewares 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.