Correlation Between CHINA TONTINE and Kingdee International

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Can any of the company-specific risk be diversified away by investing in both CHINA TONTINE 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 CHINA TONTINE and Kingdee International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA TONTINE WINES and Kingdee International Software, you can compare the effects of market volatilities on CHINA TONTINE 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 CHINA TONTINE with a short position of Kingdee International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TONTINE and Kingdee International.

Diversification Opportunities for CHINA TONTINE and Kingdee International

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between CHINA and Kingdee is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TONTINE WINES and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International and CHINA TONTINE 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 TONTINE WINES 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 CHINA TONTINE i.e., CHINA TONTINE and Kingdee International go up and down completely randomly.

Pair Corralation between CHINA TONTINE and Kingdee International

Assuming the 90 days trading horizon CHINA TONTINE WINES is expected to generate 10.51 times more return on investment than Kingdee International. However, CHINA TONTINE is 10.51 times more volatile than Kingdee International Software. It trades about 0.04 of its potential returns per unit of risk. Kingdee International Software is currently generating about -0.02 per unit of risk. If you would invest  0.70  in CHINA TONTINE WINES on October 11, 2024 and sell it today you would earn a total of  6.30  from holding CHINA TONTINE WINES or generate 900.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

CHINA TONTINE WINES  vs.  Kingdee International Software

 Performance 
       Timeline  
CHINA TONTINE WINES 

Risk-Adjusted Performance

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Over the last 90 days CHINA TONTINE WINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, CHINA TONTINE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Kingdee International 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Kingdee International Software has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Kingdee International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

CHINA TONTINE and Kingdee International Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CHINA TONTINE and Kingdee International

The main advantage of trading using opposite CHINA TONTINE and Kingdee International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TONTINE 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 CHINA TONTINE WINES 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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