Correlation Between Prosperity Dielectrics and Kaimei Electronic

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

By analyzing existing cross correlation between Prosperity Dielectrics Co and Kaimei Electronic Corp, you can compare the effects of market volatilities on Prosperity Dielectrics and Kaimei Electronic 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 Prosperity Dielectrics with a short position of Kaimei Electronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Dielectrics and Kaimei Electronic.

Diversification Opportunities for Prosperity Dielectrics and Kaimei Electronic

0.41

Correlation Coefficient

Prosperity Dielectrics  Kaimei Electronic

Very weak diversification

The 3 months correlation between Prosperity and Kaimei is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Dielectrics Co and Kaimei Electronic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kaimei Electronic Corp and Prosperity Dielectrics 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 Prosperity Dielectrics Co are associated (or correlated) with Kaimei Electronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kaimei Electronic Corp has no effect on the direction of Prosperity Dielectrics i.e., Prosperity Dielectrics and Kaimei Electronic go up and down completely randomly.

Pair Corralation between Prosperity Dielectrics and Kaimei Electronic

Assuming the 90 days trading horizon Prosperity Dielectrics Co is expected to under-perform the Kaimei Electronic. But the stock apears to be less risky and, when comparing its historical volatility, Prosperity Dielectrics Co is 1.49 times less risky than Kaimei Electronic. The stock trades about -0.1 of its potential returns per unit of risk. The Kaimei Electronic Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  6,680  in Kaimei Electronic Corp on September 21, 2024 and sell it today you would earn a total of  170.00  from holding Kaimei Electronic Corp or generate 2.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Prosperity Dielectrics Co  vs.  Kaimei Electronic Corp

Prosperity Dielectrics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prosperity Dielectrics 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.

Kaimei Electronic Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kaimei Electronic Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kaimei Electronic is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Prosperity Dielectrics and Kaimei Electronic

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

The idea behind Prosperity Dielectrics Co and Kaimei Electronic Corp 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.