Correlation Between BANK CENTRAL and Kingdee International

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

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

Diversification Opportunities for BANK CENTRAL and Kingdee International

-0.35

Correlation Coefficient

BANK CENTRAL  Kingdee International

Very good diversification

The 3 months correlation between BANK and Kingdee is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding BANK CENTRAL ASIA and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International and BANK CENTRAL 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 BANK CENTRAL ASIA 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 BANK CENTRAL i.e., BANK CENTRAL and Kingdee International go up and down completely randomly.

Pair Corralation between BANK CENTRAL and Kingdee International

Assuming the 90 days trading horizon BANK CENTRAL is expected to generate 9.89 times less return on investment than Kingdee International. But when comparing it to its historical volatility, BANK CENTRAL ASIA is 2.62 times less risky than Kingdee International. It trades about 0.02 of its potential returns per unit of risk. Kingdee International Software is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Kingdee International Software on September 30, 2024 and sell it today you would earn a total of  24.00  from holding Kingdee International Software or generate 27.91% return on investment over 90 days.

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

BANK CENTRAL ASIA  vs.  Kingdee International Software

BANK CENTRAL ASIA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BANK CENTRAL ASIA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Kingdee International

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BANK CENTRAL and Kingdee International

The main advantage of trading using opposite BANK CENTRAL and Kingdee International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BANK CENTRAL 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 BANK CENTRAL ASIA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.