Correlation Between Cambridge Technology and Kingfa Science

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

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

Diversification Opportunities for Cambridge Technology and Kingfa Science

0.81

Correlation Coefficient

Cambridge Technology  Kingfa Science

Very poor diversification

The 3 months correlation between Cambridge and Kingfa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Technology Enterpris 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 Cambridge Technology 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 Cambridge Technology Enterprises 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 Cambridge Technology i.e., Cambridge Technology and Kingfa Science go up and down completely randomly.

Pair Corralation between Cambridge Technology and Kingfa Science

Assuming the 90 days trading horizon Cambridge Technology Enterprises is expected to generate 1.34 times more return on investment than Kingfa Science. However, Cambridge Technology is 1.34 times more volatile than Kingfa Science Technology. It trades about 0.31 of its potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.34 per unit of risk. If you would invest  8,576  in Cambridge Technology Enterprises on September 26, 2024 and sell it today you would earn a total of  1,975  from holding Cambridge Technology Enterprises or generate 23.03% return on investment over 90 days.

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

Cambridge Technology Enterpris  vs.  Kingfa Science Technology

Cambridge Technology

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cambridge Technology Enterprises are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Cambridge Technology is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Kingfa Science Technology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain 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 Cambridge Technology and Kingfa Science

The main advantage of trading using opposite Cambridge Technology and Kingfa Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cambridge Technology 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 Cambridge Technology Enterprises 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.