Correlation Between Kingdee International and Firan Technology

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

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

Diversification Opportunities for Kingdee International and Firan Technology

-0.11

Correlation Coefficient

Kingdee International  Firan Technology

Good diversification

The 3 months correlation between Kingdee and Firan is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kingdee International Software and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology and Kingdee International 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 Kingdee International Software are associated (or correlated) with Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Kingdee International i.e., Kingdee International and Firan Technology go up and down completely randomly.

Pair Corralation between Kingdee International and Firan Technology

Assuming the 90 days trading horizon Kingdee International Software is expected to generate 2.28 times more return on investment than Firan Technology. However, Kingdee International is 2.28 times more volatile than Firan Technology Group. It trades about 0.15 of its potential returns per unit of risk. Firan Technology Group is currently generating about -0.04 per unit of risk. If you would invest  110.00  in Kingdee International Software on December 23, 2024 and sell it today you would earn a total of  48.00  from holding Kingdee International Software or generate 43.64% return on investment over 90 days.

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

Kingdee International Software  vs.  Firan Technology Group

Kingdee International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kingdee International Software are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, Kingdee International reported solid returns over the last few months and may actually be approaching a breakup point.

Firan Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Firan Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Firan Technology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Kingdee International and Firan Technology

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

The idea behind Kingdee International Software and Firan Technology Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.