Correlation Between Guangdong Skychem and INKON Life

Can any of the company-specific risk be diversified away by investing in both Guangdong Skychem and INKON Life 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 Guangdong Skychem and INKON Life into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Guangdong Skychem Technology and INKON Life Technology, you can compare the effects of market volatilities on Guangdong Skychem and INKON Life 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 Guangdong Skychem with a short position of INKON Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Skychem and INKON Life.

Diversification Opportunities for Guangdong Skychem and INKON Life

0.22

Correlation Coefficient

Guangdong Skychem  INKON Life

Modest diversification

The 3 months correlation between Guangdong and INKON is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Skychem Technology and INKON Life Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INKON Life Technology and Guangdong Skychem 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 Guangdong Skychem Technology are associated (or correlated) with INKON Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INKON Life Technology has no effect on the direction of Guangdong Skychem i.e., Guangdong Skychem and INKON Life go up and down completely randomly.

Pair Corralation between Guangdong Skychem and INKON Life

Assuming the 90 days trading horizon Guangdong Skychem Technology is expected to generate 1.2 times more return on investment than INKON Life. However, Guangdong Skychem is 1.2 times more volatile than INKON Life Technology. It trades about -0.12 of its potential returns per unit of risk. INKON Life Technology is currently generating about -0.31 per unit of risk. If you would invest  12,202  in Guangdong Skychem Technology on October 5, 2024 and sell it today you would lose (797.00) from holding Guangdong Skychem Technology or give up 6.53% of portfolio value over 90 days.

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

Guangdong Skychem Technology  vs.  INKON Life Technology

Guangdong Skychem

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Skychem Technology are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Guangdong Skychem sustained solid returns over the last few months and may actually be approaching a breakup point.

INKON Life Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INKON Life Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Guangdong Skychem and INKON Life

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

The idea behind Guangdong Skychem Technology and INKON Life Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .