Correlation Between Li Kang and Standard Foods
Can any of the company-specific risk be diversified away by investing in both Li Kang and Standard Foods 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 Li Kang and Standard Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Li Kang Biomedical and Standard Foods Corp, you can compare the effects of market volatilities on Li Kang and Standard Foods 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 Li Kang with a short position of Standard Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and Standard Foods.
Diversification Opportunities for Li Kang and Standard Foods
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 6242 and Standard is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and Standard Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Foods Corp and Li Kang 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 Li Kang Biomedical are associated (or correlated) with Standard Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Foods Corp has no effect on the direction of Li Kang i.e., Li Kang and Standard Foods go up and down completely randomly.
Pair Corralation between Li Kang and Standard Foods
Assuming the 90 days trading horizon Li Kang Biomedical is expected to generate 2.29 times more return on investment than Standard Foods. However, Li Kang is 2.29 times more volatile than Standard Foods Corp. It trades about 0.04 of its potential returns per unit of risk. Standard Foods Corp is currently generating about -0.09 per unit of risk. If you would invest 4,265 in Li Kang Biomedical on December 30, 2024 and sell it today you would earn a total of 145.00 from holding Li Kang Biomedical or generate 3.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Li Kang Biomedical vs. Standard Foods Corp
Performance |
Timeline |
Li Kang Biomedical |
Standard Foods Corp |
Li Kang and Standard Foods Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Li Kang and Standard Foods
The main advantage of trading using opposite Li Kang and Standard Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Li Kang position performs unexpectedly, Standard Foods 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 Standard Foods will offset losses from the drop in Standard Foods' long position.Li Kang vs. Sunny Friend Environmental | Li Kang vs. Shinkong Insurance Co | Li Kang vs. Shanghai Commercial Savings | Li Kang vs. Cleanaway Co |
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Check out your portfolio center.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..
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