Correlation Between Cholamandalam Financial and Kingfa Science

Can any of the company-specific risk be diversified away by investing in both Cholamandalam Financial and Kingfa Science 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 Cholamandalam Financial and Kingfa Science into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cholamandalam Financial Holdings and Kingfa Science Technology, you can compare the effects of market volatilities on Cholamandalam Financial and Kingfa Science 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 Cholamandalam Financial with a short position of Kingfa Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cholamandalam Financial and Kingfa Science.

Diversification Opportunities for Cholamandalam Financial and Kingfa Science

0.39

Correlation Coefficient

Cholamandalam Financial  Kingfa Science

Weak diversification

The 3 months correlation between Cholamandalam and Kingfa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cholamandalam Financial Holdin and Kingfa Science Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingfa Science Technology and Cholamandalam Financial 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 Cholamandalam Financial Holdings are associated (or correlated) with Kingfa Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingfa Science Technology has no effect on the direction of Cholamandalam Financial i.e., Cholamandalam Financial and Kingfa Science go up and down completely randomly.

Pair Corralation between Cholamandalam Financial and Kingfa Science

Assuming the 90 days trading horizon Cholamandalam Financial Holdings is expected to under-perform the Kingfa Science. But the stock apears to be less risky and, when comparing its historical volatility, Cholamandalam Financial Holdings is 1.22 times less risky than Kingfa Science. The stock trades about -0.12 of its potential returns per unit of risk. The Kingfa Science Technology is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  286,120  in Kingfa Science Technology on September 23, 2024 and sell it today you would earn a total of  55,820  from holding Kingfa Science Technology or generate 19.51% return on investment over 90 days.

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

Cholamandalam Financial Holdin  vs.  Kingfa Science Technology

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings 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 fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kingfa Science Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Kingfa Science may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cholamandalam Financial and Kingfa Science

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

The idea behind Cholamandalam Financial Holdings and Kingfa Science 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.