Correlation Between Power Wind and King Chou

Can any of the company-specific risk be diversified away by investing in both Power Wind and King Chou 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 Power Wind and King Chou into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Wind Health and King Chou Marine, you can compare the effects of market volatilities on Power Wind and King Chou 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 Power Wind with a short position of King Chou. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Wind and King Chou.

Diversification Opportunities for Power Wind and King Chou

0.53

Correlation Coefficient

Power Wind  King Chou

Very weak diversification

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

Pair Corralation between Power Wind and King Chou

Assuming the 90 days trading horizon Power Wind Health is expected to generate 2.71 times more return on investment than King Chou. However, Power Wind is 2.71 times more volatile than King Chou Marine. It trades about 0.15 of its potential returns per unit of risk. King Chou Marine is currently generating about 0.25 per unit of risk. If you would invest  11,300  in Power Wind Health on December 21, 2024 and sell it today you would earn a total of  1,950  from holding Power Wind Health or generate 17.26% return on investment over 90 days.

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

Power Wind Health  vs.  King Chou Marine

Power Wind Health

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power Wind Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Power Wind showed solid returns over the last few months and may actually be approaching a breakup point.

King Chou Marine

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in King Chou Marine are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, King Chou may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Power Wind and King Chou

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

The idea behind Power Wind Health and King Chou Marine 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.

Check out your portfolio center.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.