Correlation Between Dassault Systèmes and Kingdee International

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

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

Diversification Opportunities for Dassault Systèmes and Kingdee International

0.21

Correlation Coefficient

Dassault Systèmes  Kingdee International

Modest diversification

The 3 months correlation between Dassault and Kingdee is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dassault Systmes SE and Kingdee International Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingdee International and Dassault Systèmes 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 Dassault Systmes SE 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 Dassault Systèmes i.e., Dassault Systèmes and Kingdee International go up and down completely randomly.

Pair Corralation between Dassault Systèmes and Kingdee International

Assuming the 90 days horizon Dassault Systèmes is expected to generate 2.48 times less return on investment than Kingdee International. But when comparing it to its historical volatility, Dassault Systmes SE is 1.79 times less risky than Kingdee International. It trades about 0.05 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  104.00  in Kingdee International Software on October 4, 2024 and sell it today you would earn a total of  3.00  from holding Kingdee International Software or generate 2.88% return on investment over 90 days.

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

Dassault Systmes SE  vs.  Kingdee International Software

Dassault Systèmes

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kingdee International

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dassault Systèmes and Kingdee International

The main advantage of trading using opposite Dassault Systèmes and Kingdee International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dassault Systèmes 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 Dassault Systmes SE 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.