Correlation Between GM Breweries and Kingfa Science

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

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

Diversification Opportunities for GM Breweries and Kingfa Science

0.69

Correlation Coefficient

GM Breweries  Kingfa Science

Poor diversification

The 3 months correlation between GMBREW and Kingfa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited 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 GM Breweries 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 GM Breweries Limited 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 GM Breweries i.e., GM Breweries and Kingfa Science go up and down completely randomly.

Pair Corralation between GM Breweries and Kingfa Science

Assuming the 90 days trading horizon GM Breweries is expected to generate 1.59 times less return on investment than Kingfa Science. In addition to that, GM Breweries is 1.21 times more volatile than Kingfa Science Technology. It trades about 0.06 of its total potential returns per unit of risk. Kingfa Science Technology is currently generating about 0.11 per unit of volatility. If you would invest  202,981  in Kingfa Science Technology on September 24, 2024 and sell it today you would earn a total of  138,959  from holding Kingfa Science Technology or generate 68.46% return on investment over 90 days.

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

GM Breweries Limited  vs.  Kingfa Science Technology

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kingfa Science Technology

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kingfa Science Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Kingfa Science is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with GM Breweries and Kingfa Science

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