Correlation Between CHINA CONCH and Kurita Water

Can any of the company-specific risk be diversified away by investing in both CHINA CONCH and Kurita Water 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 CHINA CONCH and Kurita Water into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA CH VENT and Kurita Water Industries, you can compare the effects of market volatilities on CHINA CONCH and Kurita Water 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 CHINA CONCH with a short position of Kurita Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA CONCH and Kurita Water.

Diversification Opportunities for CHINA CONCH and Kurita Water

-0.53

Correlation Coefficient

CHINA CONCH  Kurita Water

Excellent diversification

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

Pair Corralation between CHINA CONCH and Kurita Water

Assuming the 90 days horizon CHINA CH VENT is expected to generate 1.81 times more return on investment than Kurita Water. However, CHINA CONCH is 1.81 times more volatile than Kurita Water Industries. It trades about 0.08 of its potential returns per unit of risk. Kurita Water Industries is currently generating about -0.04 per unit of risk. If you would invest  78.00  in CHINA CH VENT on December 21, 2024 and sell it today you would earn a total of  12.00  from holding CHINA CH VENT or generate 15.38% return on investment over 90 days.

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

CHINA CH VENT  vs.  Kurita Water Industries

CHINA CH VENT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHINA CH VENT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, CHINA CONCH reported solid returns over the last few months and may actually be approaching a breakup point.

Kurita Water Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kurita Water Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHINA CONCH and Kurita Water

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

The idea behind CHINA CH VENT and Kurita Water Industries 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.