Correlation Between Information Technology and Kunyue Development

Can any of the company-specific risk be diversified away by investing in both Information Technology and Kunyue Development 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 Information Technology and Kunyue Development into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Information Technology Total and Kunyue Development Co, you can compare the effects of market volatilities on Information Technology and Kunyue Development 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 Information Technology with a short position of Kunyue Development. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Technology and Kunyue Development.

Diversification Opportunities for Information Technology and Kunyue Development

0.53

Correlation Coefficient

Information Technology  Kunyue Development

Very weak diversification

The 3 months correlation between Information and Kunyue is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Information Technology Total and Kunyue Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunyue Development and Information Technology 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 Information Technology Total are associated (or correlated) with Kunyue Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunyue Development has no effect on the direction of Information Technology i.e., Information Technology and Kunyue Development go up and down completely randomly.

Pair Corralation between Information Technology and Kunyue Development

Assuming the 90 days trading horizon Information Technology is expected to generate 2.29 times less return on investment than Kunyue Development. In addition to that, Information Technology is 1.16 times more volatile than Kunyue Development Co. It trades about 0.03 of its total potential returns per unit of risk. Kunyue Development Co is currently generating about 0.08 per unit of volatility. If you would invest  2,120  in Kunyue Development Co on December 26, 2024 and sell it today you would earn a total of  2,230  from holding Kunyue Development Co or generate 105.19% return on investment over 90 days.

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

Information Technology Total  vs.  Kunyue Development Co

Information Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Information Technology Total are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Information Technology showed solid returns over the last few months and may actually be approaching a breakup point.

Kunyue Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kunyue Development Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kunyue Development 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 Information Technology and Kunyue Development

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

The idea behind Information Technology Total and Kunyue Development Co 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.