Correlation Between Li Kang and GrandTech

Can any of the company-specific risk be diversified away by investing in both Li Kang and GrandTech 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 GrandTech 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 GrandTech CG Systems, you can compare the effects of market volatilities on Li Kang and GrandTech 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 GrandTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Li Kang and GrandTech.

Diversification Opportunities for Li Kang and GrandTech

0.48

Correlation Coefficient

Li Kang  GrandTech

Very weak diversification

The 3 months correlation between 6242 and GrandTech is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Li Kang Biomedical and GrandTech CG Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GrandTech CG Systems 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 GrandTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GrandTech CG Systems has no effect on the direction of Li Kang i.e., Li Kang and GrandTech go up and down completely randomly.

Pair Corralation between Li Kang and GrandTech

Assuming the 90 days trading horizon Li Kang Biomedical is expected to generate 0.99 times more return on investment than GrandTech. However, Li Kang Biomedical is 1.02 times less risky than GrandTech. It trades about -0.01 of its potential returns per unit of risk. GrandTech CG Systems is currently generating about -0.13 per unit of risk. If you would invest  4,320  in Li Kang Biomedical on September 17, 2024 and sell it today you would lose (30.00) from holding Li Kang Biomedical or give up 0.69% of portfolio value over 90 days.

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

Li Kang Biomedical  vs.  GrandTech CG Systems

Li Kang Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Li Kang Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Li Kang is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Li Kang and GrandTech

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

The idea behind Li Kang Biomedical and GrandTech CG Systems 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.