Correlation Between Kinko Optical and Tong Tai

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

By analyzing existing cross correlation between Kinko Optical Co and Tong Tai Machine Tool, you can compare the effects of market volatilities on Kinko Optical and Tong Tai 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 Kinko Optical with a short position of Tong Tai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinko Optical and Tong Tai.

Diversification Opportunities for Kinko Optical and Tong Tai

0.68

Correlation Coefficient

Kinko Optical  Tong Tai

Poor diversification

The 3 months correlation between Kinko and Tong is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Kinko Optical Co and Tong Tai Machine Tool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tong Tai Machine and Kinko Optical 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 Kinko Optical Co are associated (or correlated) with Tong Tai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tong Tai Machine has no effect on the direction of Kinko Optical i.e., Kinko Optical and Tong Tai go up and down completely randomly.

Pair Corralation between Kinko Optical and Tong Tai

Assuming the 90 days trading horizon Kinko Optical is expected to generate 1.14 times less return on investment than Tong Tai. In addition to that, Kinko Optical is 1.15 times more volatile than Tong Tai Machine Tool. It trades about 0.27 of its total potential returns per unit of risk. Tong Tai Machine Tool is currently generating about 0.35 per unit of volatility. If you would invest  2,845  in Tong Tai Machine Tool on December 4, 2024 and sell it today you would earn a total of  585.00  from holding Tong Tai Machine Tool or generate 20.56% return on investment over 90 days.

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

Kinko Optical Co  vs.  Tong Tai Machine Tool

Kinko Optical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kinko Optical Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kinko Optical showed solid returns over the last few months and may actually be approaching a breakup point.

Tong Tai Machine

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tong Tai Machine Tool are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Tong Tai may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Kinko Optical and Tong Tai

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

The idea behind Kinko Optical Co and Tong Tai Machine Tool 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.