Correlation Between Awilco Drilling and Kingdee International

Can any of the company-specific risk be diversified away by investing in both Awilco Drilling and Kingdee International 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 Awilco Drilling and Kingdee International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Awilco Drilling PLC and Kingdee International Software, you can compare the effects of market volatilities on Awilco Drilling and Kingdee International 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 Awilco Drilling with a short position of Kingdee International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Awilco Drilling and Kingdee International.

Diversification Opportunities for Awilco Drilling and Kingdee International

0.08

Correlation Coefficient

Awilco Drilling  Kingdee International

Significant diversification

The 3 months correlation between Awilco and Kingdee is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Awilco Drilling PLC and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International and Awilco Drilling 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 Awilco Drilling PLC are associated (or correlated) with Kingdee International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingdee International has no effect on the direction of Awilco Drilling i.e., Awilco Drilling and Kingdee International go up and down completely randomly.

Pair Corralation between Awilco Drilling and Kingdee International

Assuming the 90 days horizon Awilco Drilling PLC is expected to under-perform the Kingdee International. But the otc stock apears to be less risky and, when comparing its historical volatility, Awilco Drilling PLC is 14.54 times less risky than Kingdee International. The otc stock trades about -0.13 of its potential returns per unit of risk. The Kingdee International Software is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Kingdee International Software on December 20, 2024 and sell it today you would earn a total of  83.00  from holding Kingdee International Software or generate 70.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Awilco Drilling PLC  vs.  Kingdee International Software

Awilco Drilling PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Awilco Drilling PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Awilco Drilling is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Kingdee International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Awilco Drilling and Kingdee International

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

The idea behind Awilco Drilling PLC and Kingdee International Software 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.