Correlation Between Kuang Hong and Farglory Land

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

By analyzing existing cross correlation between Kuang Hong Arts and Farglory Land Development, you can compare the effects of market volatilities on Kuang Hong and Farglory Land 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 Kuang Hong with a short position of Farglory Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kuang Hong and Farglory Land.

Diversification Opportunities for Kuang Hong and Farglory Land

0.76

Correlation Coefficient

Kuang Hong  Farglory Land

Poor diversification

The 3 months correlation between Kuang and Farglory is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kuang Hong Arts and Farglory Land Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farglory Land Development and Kuang Hong 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 Kuang Hong Arts are associated (or correlated) with Farglory Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farglory Land Development has no effect on the direction of Kuang Hong i.e., Kuang Hong and Farglory Land go up and down completely randomly.

Pair Corralation between Kuang Hong and Farglory Land

Assuming the 90 days trading horizon Kuang Hong Arts is expected to generate 0.6 times more return on investment than Farglory Land. However, Kuang Hong Arts is 1.65 times less risky than Farglory Land. It trades about 0.11 of its potential returns per unit of risk. Farglory Land Development is currently generating about 0.0 per unit of risk. If you would invest  7,320  in Kuang Hong Arts on September 29, 2024 and sell it today you would earn a total of  1,710  from holding Kuang Hong Arts or generate 23.36% return on investment over 90 days.

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

Kuang Hong Arts  vs.  Farglory Land Development

Kuang Hong Arts

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kuang Hong Arts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kuang Hong showed solid returns over the last few months and may actually be approaching a breakup point.

Farglory Land Development

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farglory Land Development are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Farglory Land showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kuang Hong and Farglory Land

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

The idea behind Kuang Hong Arts and Farglory Land Development 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.