Correlation Between GrandTech and Kworld Computer

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

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

Diversification Opportunities for GrandTech and Kworld Computer

0.69

Correlation Coefficient

GrandTech  Kworld Computer

Poor diversification

The 3 months correlation between GrandTech and Kworld is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GrandTech CG Systems and Kworld Computer Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kworld Computer and GrandTech 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 GrandTech CG Systems 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 GrandTech i.e., GrandTech and Kworld Computer go up and down completely randomly.

Pair Corralation between GrandTech and Kworld Computer

Assuming the 90 days trading horizon GrandTech CG Systems is expected to generate 0.38 times more return on investment than Kworld Computer. However, GrandTech CG Systems is 2.61 times less risky than Kworld Computer. It trades about -0.14 of its potential returns per unit of risk. Kworld Computer Co is currently generating about -0.06 per unit of risk. If you would invest  6,140  in GrandTech CG Systems on September 14, 2024 and sell it today you would lose (440.00) from holding GrandTech CG Systems or give up 7.17% of portfolio value over 90 days.

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

GrandTech CG Systems  vs.  Kworld Computer Co

GrandTech CG Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrandTech CG Systems 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 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.

Pair Trading with GrandTech and Kworld Computer

The main advantage of trading using opposite GrandTech and Kworld Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrandTech 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 GrandTech CG Systems 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..