Correlation Between Keli Sensing and Hainan Development

Can any of the company-specific risk be diversified away by investing in both Keli Sensing and Hainan Development 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 Keli Sensing and Hainan Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Keli Sensing Technology and Hainan Development Holdings, you can compare the effects of market volatilities on Keli Sensing and Hainan Development 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 Keli Sensing with a short position of Hainan Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keli Sensing and Hainan Development.

Diversification Opportunities for Keli Sensing and Hainan Development

0.52

Correlation Coefficient

Keli Sensing  Hainan Development

Very weak diversification

The 3 months correlation between Keli and Hainan is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Keli Sensing Technology and Hainan Development Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hainan Development and Keli Sensing 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 Keli Sensing Technology are associated (or correlated) with Hainan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hainan Development has no effect on the direction of Keli Sensing i.e., Keli Sensing and Hainan Development go up and down completely randomly.

Pair Corralation between Keli Sensing and Hainan Development

Assuming the 90 days trading horizon Keli Sensing Technology is expected to generate 1.16 times more return on investment than Hainan Development. However, Keli Sensing is 1.16 times more volatile than Hainan Development Holdings. It trades about 0.24 of its potential returns per unit of risk. Hainan Development Holdings is currently generating about 0.09 per unit of risk. If you would invest  3,525  in Keli Sensing Technology on October 22, 2024 and sell it today you would earn a total of  3,849  from holding Keli Sensing Technology or generate 109.19% return on investment over 90 days.

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

Keli Sensing Technology  vs.  Hainan Development Holdings

Keli Sensing Technology

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Keli Sensing Technology are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Keli Sensing sustained solid returns over the last few months and may actually be approaching a breakup point.

Hainan Development

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hainan Development Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hainan Development sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keli Sensing and Hainan Development

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

The idea behind Keli Sensing Technology and Hainan Development Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.