Correlation Between Sports Gear and Kuang Hong

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

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

Diversification Opportunities for Sports Gear and Kuang Hong

-0.03

Correlation Coefficient

Sports Gear  Kuang Hong

Good diversification

The 3 months correlation between Sports and Kuang is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sports Gear Co and Kuang Hong Arts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuang Hong Arts and Sports Gear 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 Sports Gear Co are associated (or correlated) with Kuang Hong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuang Hong Arts has no effect on the direction of Sports Gear i.e., Sports Gear and Kuang Hong go up and down completely randomly.

Pair Corralation between Sports Gear and Kuang Hong

Assuming the 90 days trading horizon Sports Gear Co is expected to under-perform the Kuang Hong. In addition to that, Sports Gear is 1.3 times more volatile than Kuang Hong Arts. It trades about -0.29 of its total potential returns per unit of risk. Kuang Hong Arts is currently generating about 0.54 per unit of volatility. If you would invest  7,330  in Kuang Hong Arts on September 29, 2024 and sell it today you would earn a total of  1,700  from holding Kuang Hong Arts or generate 23.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Sports Gear Co  vs.  Kuang Hong Arts

Sports Gear

Risk-Adjusted Performance

6 of 100

Modest

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

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.

Pair Trading with Sports Gear and Kuang Hong

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

The idea behind Sports Gear Co and Kuang Hong Arts 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.